The exchange rate for customs duties collection has dropped from N1516/$ to N1512/$ between the 5th of July and the 7th of July 2024. This represents a decline of N4 when compared to the previous rate.
The drop in the exchange rate reflects the decline in rates between the 4th and 5th of July 2024 where the official market rate dropped from N1520/$ to N1509/$
The high FX rate for customs duties collection mirrors the weakening of the naira in both the official and parallel markets. This comes despite a relatively stable FX market in June.
In June, the FX market and the customs exchange rate showed some stability, with the exchange rate fluctuating between N1,473 and N1,510, and closing at N1,505.30/$1, indicating a 1.3% depreciation for the month.
This stability, despite earlier volatility, suggests that the CBN’s reforms and policy measures may be starting to stabilize the foreign exchange market.
In the first half of 2024, the CBN significantly raised the Monetary Policy Rate (MPR) by a cumulative 750 basis points to tackle rising inflation and attract foreign portfolio investors.
This move had an immediate impact in the first quarter, with foreign portfolio investment rising to $2.07 billion, the highest quarterly amount since Q1 2020. Additionally, total capital imports for the quarter increased to $3.37 billion, also the highest since Q1 2020.
The CBN will hold its next Monetary Policy Committee (MPC) meeting later this month and will decide to either hold or continue with the interest rate hike that characterised the first quarter of the year.
Impact of high interest rate on businesses
Already, stakeholders in the business community have begun to complain about the high interest rate environment stating it hinders growth and job creation.
At the Manufacturers Association of Nigeria (MAN), Africa’s richest man Aliko Dangote stated that no jobs would be created or economic growth with the banks charging as high as 30% interest rate.
He said, “Right now, at 30%, there is no way anybody can create jobs because we are stifling growth. So interest rate can remain at 30% but no growth will happen unless that interest rate comes down”
Alhaji Aliko Dangote’s statement becomes true in light of the spike in finance costs of major consumer goods companies in Nigeria.
In the first quarter of the year, a review by Nairametrics revealed that the finance cost of major consumer goods companies listed on the NGX increased by 1,345% when compared to the corresponding period of 2023 with Nestle Plc being the greatest casualty as its borrowing cost soared from N3.74 billion in Q1, 2023 to N217.01 billion in Q1, 2024.