• Introduces product price verification mechanism
• Elumelu praises measures
In a major policy coup, the Central Bank of Nigeria (CBN) yesterdaymoved to arrest the age-long practice of over-invoicing, which unscrupulous businesses have used to cart away the nation’s forex, directing banks and other authorised dealers to desist from opening Forms ‘M’ whose payment are routed through a buying company, agent, or other third parties.
In addition, the central bank announced the introduction of a product price verification mechanism, which is to help prevent overpricing or mispricing of imported goods and services.
It said the move was part of its continued efforts to ensure prudent use of the scarce foreign exchange resources and eliminate incidences of over-invoicing, transfer pricing, double handling charges and avoidable costs that are ultimately passed to the average Nigerian consumers.
The measures attracted praise by the Chairman of United Bank for Africa (UBA), Mr. Tony Elumelu, who said bolder and more cohesive measures like these would make the difference in the spirited efforts to revive the nation’s ailing economy.
The CBN took the measures in a circular titled: “Destination Payment for All Forms M, Letter of Credit and Other Forms of Payment,” dated August 24, 2020.
The circular addressed to all authorised dealers and members of the public was signed by the Director, Trade and Exchange Department, CBN, Dr. Ozoemena Nnaji.
A Form M is a mandatory statutory document to be completed by all importers for the importation of goods into Nigeria. It is mandatory for all importers to complete and register Form ‘M’ with authorised dealers at the time of placing orders.
The CBN said: “As part of continued efforts of the CBN to ensure prudent use of our foreign exchange resources and eliminate incidences of over-invoicing, transfer pricing, double handling charges and avoidable costs that are ultimately passed to the average Nigerian consumers, authorised dealers are hereby directed to desist from opening Forms ‘M’ whose payment are routed through a buying company, agent or any other third parties.
“Accordingly, all authorised dealers are hereby requested to only open Forms ‘M’ for Letters of Credit, bills for collection and other forms of payment in favour of the ultimate supplier of the product or service. This directive is with immediate effect.
“Additionally, in line with best practices around the world, the CBN will be immediately introducing a product price verification mechanism to forestall over-pricing and/or mispricing of goods and services imported into the country.
“All authorised dealers shall use this mechanism to verify quoted prices before Forms ‘M’ are approved. Please ensure strict compliance.”
Over-invoicing of imports have been a major drain on the nation’sexternal reserves, which stood at $35.597 billion as of August 20, according to figures obtained on the CBN’s website.
Analysts praised the CBN for summoning the will to take these measures at a time like this when the country is witnessing major economic stress.
Elumelu led the commendation group yesterday, saying: “One should always commend robust and forward-thinking measures by key public sector actors whenever they are taken and I am always eager to commend loudly and publicly when it is merited.”
He said he could not have been happier to read the latest policy measures issued by the Godwin Emefiele-led CBN aimed at eliminating the use of “buying agents” or third parties.
“This particular loophole has been a drain on our FX resources and its immediate elimination should be welcomed by all well-meaning Nigerians and friends of Nigeria,” he said on his verified Twitter handle.
Elumelu said the new measures along with other initiatives, including boosting rice and gold production, the ongoing power sector sustainable liquidity and global standing payment order for all defaulting loan customers, there would be cause for optimism for the revival of the economy.