Government begins implementation of zero duty on selected food items

•Inflation to drop 33.2 per cent, analysts predict

The Ministry of Finance has given the nod to the Nigeria Customs Service (NCS) to begin the implementation of the 150-day zero import duty on basic food items, a move expected to bring down the prices of food.

Confirming the approval, the NCS said the duty waiver took effect on July 15 and will end on December 31. Hence, the government has effectively suspended duties, tariffs and taxes on the importation of food staples through land and sea borders to reduce inflation.

The minister of finance and coordinating minister for the economy, Wale Edun said: “The measure which is geared towards ameliorating the high cost of food items in the Nigerian market shall be limited to the national supply gap to be determined by a committee set up by the Minister”.

On the guidelines for participating in the importation, the Minister explained that importers applying for the duty waiver must have milling capacity and a verifiable backward integration programme (BIP).

“The importation of these items shall also be limited to investors with milling capacity and verifiable BIP for some of the items,” he said. He stated that the ministry will furnish customs with the list of importers and their approved quotas to guide the importation of the basic food items during the implementation.

This comes as the Senior Financial Market Analyst at FXTM, Lukman Otunuga, said output data, fluctuation in oil prices and currency stability will be crucial in determining the country’s economic outlook discussions this week. He added that there would be a slight decline in the consumer price index (CPI), which is due for release today.

They expect July’s inflation rate to cool to 33.2 per cent, offering some relief to consumers who have been under intense pressure from rising prices.
In his paper titled, ‘Nigeria Week Ahead: Inflation, Naira and Oil in Focus’, Otunuga provided insights into the current state of the Nigerian economy, which is the fourth largest in Africa. He said throughout 2024, Nigeria has been grappling with surging inflation, which reached a staggering 34.2 per cent in June, the highest rate since 1996.

The potential decrease in inflation comes amidst the Central Bank of Nigeria’s (CBN) aggressive monetary tightening measures, which have seen interest rates increase by 800 basis points this year.

According to the analyst, the CBN’s efforts to curb inflation have been closely monitored and a reduction in the CPI could indicate that the measures are beginning to take effect.

He said beyond inflation, attention is also turning to the gross domestic product (GDP) data, which is set to be released later this month. Otunuga said following a three per cent expansion in the first quarter, there is significant interest in whether the level of growth can be sustained in the second quarter.

He said analysts and investors alike are eager to see if Nigeria can maintain its economic momentum in the face of ongoing challenges.On the foreign exchange front, Otunuga said the naira has shown signs of strength against the dollar, with the spot rate recorded at N1,589 as of Monday.

Otunuga noted that this strengthening of the naira is a positive development, offering some stability in an otherwise challenging economic environment.
He said oil, which is a critical component of Nigeria’s economy, remains in the spotlight as well.

According to him, recent geopolitical tensions in the Middle East have pushed oil prices higher, with Brent crude rising over four percent since the start of the year, currently trading above $80 per barrel.

While higher oil prices could boost Nigeria’s revenue, Otunuga cautioned that this could be offset by the increasing cost of fuel imports, which is currently draining $600 million from the economy each month.