CBN’s policy on Form ‘M’ will kill trade, economy, say ANLCA

From Anthony Nwachukwu, Lagos

Recent directive by the Central Bank of Nigeria (CBN) to banks ending the outsourcing and opening of Form ‘M’ through third party, agent or buying company has been condemned as a ploy to reintroduce import pre-shipment inspection through product price verification and jettison destination inspection (DI).

The CBN had, in an August 24, 2020 circular by the Director, Trade and Exchange Department, Dr. Ozoemena Nnaji, said it was introducing price verification mechanism on every product in order to check over-pricing or mispricing of imported goods.

The move, it stated, would ensure the “prudent use of 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.”

Reacting to this claim, however, the Association of Nigeria Licensed Customs Agents (ANLCA) said the apex bank’s explanation that it aimed to end by the policy the decades of over-invoicing and foreign exchange scam by some importers and other businesses that use it to secure more foreign exchange allocations from banks was deceptive.

ANLCA Vice President, Dr. Kayode Farinto, said that contrary to Article 7 of the General Agreement on Tariff and Trade, which requires five to six principles before a price is agreed, and to which Nigeria is signatory, the CBN would, by this move, be engaging pre-shipment inspectors through the back door.

According to him, beside the directive being a fiscal policy issue within the purview of the Ministry of Finance and the Nigeria Customs Service (NCS) rather than the CBN’s, banning third-party agreements in Form-M will not only negatively affect Nigerian imports but will also cause many to lose their jobs.

“Whoever signed this circular does not have the interest of Nigerians at heart because what this policy means is that there won’t be third-party involvement in Form-M again,” Farinto stated.

“Why is the CBN dabbling into fiscal policy issues? Why is CBN not focusing on the monetary policy function that is germane to its operation?

“In the last one year, about 81 items have been on the forex prohibition list, causing many importers not to want to declare what they bring in. As if this is not enough problem for us at the ports, the CBN alters the Naira exchange rate at its whims and caprices.

“You can wake up tomorrow and the Customs Services will tell you that the CBN has changed the exchange rate. Now the CBN has banned third-party involvement in Form-M issuance. This is killing trade and will affect the nation’s import volume.

“Globally, outsourcing is acceptable. There is no way we can do away with third-party arrangement with the way global trade currently is. The CBN policy on Form-M is going to kill a major component of trade and ultimately kill our economy.

“What we expect CBN to be doing is to look at how to stabilise our exchange rate, which has been fluctuating in the past four months. Last year, we were actually using N345/$1 to process import declaration. This year, we are now using N361/$1 to do the same job.

“As I speak, we are already hearing that it will change to N381/$1 in the next few weeks. There is no predictability in our exchange rate, and this is not helping trade.

“CBN’s product price verification policy simply means that they want to bring us back to pre-shipment inspection era. Nigeria is already in designation inspection era, we just hope that the CBN is not taking us back to the pre-shipment inspection regime.”

The apex bank’s circular, which was addressed to all authorised dealers and members of the public, had requested relevant persons “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, 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.”

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