The exchange rate for the Nigeria Customs Service (NCS) import duty collection has dropped by 10.34% in just two days from N1480/$ to N1,327.5/$.
This represents a decline of N153.1 since May 27th, 2024, when the exchange rate for the service stood at N1,480/$.
Furthermore, the current exchange rate for the customs service is the lowest recorded in the month of May so far, as the naira lost steam after becoming the best-performing currency in the world in April.
The decline in the customs duties exchange rate mirrors the significant appreciation of the naira in the official market. On Monday, the naira gained about 10.71% increasing from about N1,480 which it closed the last week to N1,339/$.
Increase in MPR by CBN
The strengthening of the Naira this week follows further aggressive monetary policy tightening by the Central Bank of Nigeria (CBN) last week.
The apex bank increased the benchmark interest rate by another 150 basis points to 26.25% during its last MPC meeting on Tuesday. The increase makes it the third consecutive MPR hike by the CBN in 2024 and adds to a cumulative 750 basis points increase in MPR just in the first half of the year.
The bank had increased interest rates in February and March by 400 and 200 basis points respectively in a bid to rein in inflation and bring stability to the foreign exchange market that has seen significant volatility in the past 9 months.
While the initial MPR hike by the CBN was applauded by members of the public, the recent 150 basis points have had members question the efficacy of the policy in light of the renewed depreciation of the naira and continued rise in inflation.
In April, Nigeria’s headline inflation rate rose to 33.69% with food inflation reaching 40.53% for the month. The CBN, federal government, and other international development institutions like the World Bank, IMF, and others had earlier in the year projected inflation to begin to decelerate after the first quarter. However, that is not the case as the inflation rate for April increased for the 16th consecutive month dating back to December 2022 when headline inflation last declined.
Beyond taming inflation, the business community has spoken against the recent MPR hike noting that it will increase the cost of accessing capital and further compound the problems they are battling. The hike in MPR since the beginning of the year pushed Nigeria into a high-interest business climate with the CBN selling treasury and OMO bills above 20%.
Furthermore, the FGN savings bonds issued by the Debt Management Office (DMO) now carry an interest rate of almost 20%.