Neco 2020 Commerce Question 4

Practice essay / theory question 4 from the 2020 Neco Commerce examination. This question covers Foreign Trade .

Neco 2020 Commerce Essay / Theory

Topic: Foreign Trade

Question 4 NECO • 2020 • COMMERCE • essay

A Nigerian importer wishes to bring in 10,000 kilograms of cocoa beans from Ghana. The agreed FOB (Free on Board) price in Ghana is $\$2.20$ per kilogram. The current exchange rate is $\$1 = ₦460$. The importer must pay a customs duty of 5% on the CIF (Cost, Insurance and Freight) value, a levy of 2% on the same CIF value, and a 10% import VAT on the total of CIF plus duties and levy. Insurance is quoted at 0.5% of the FOB value, and freight from the Ghanaian port to Lagos port is \$0.30 per kilogram. The importer also incurs a fixed clearing and handling charge of ₦12,500.

( a )

Determine the CIF value in Nigerian Naira.

( b )

Calculate the total amount of customs duty, levy, and import VAT payable in Naira.

( c )

Find the total landed cost per kilogram of cocoa beans (including all charges and the fixed clearing fee spread over the shipment).

( d )

Discuss two possible effects on the importer’s profitability if the exchange rate depreciates to $\$1 = ₦500$ while all other terms remain unchanged.

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This is Neco 2020 Commerce Question 4. It is one of the essay questions from the 2020 Neco Commerce examination.

The question covers Foreign Trade .

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