The Central Bank of Nigeria (CBN) has banned banks from opening Forms M (FOR IMPORTERS) “whose payments are routed through a buying company/agent or any other third parties.”
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 move will stop 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.
The apex bank also announced the introduction of a product price verification mechanism, which is to help prevent overpricing or mispricing of imported goods and services.
CBN said the fresh measures are part of its efforts to ensure prudent use of the country’s 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 consumer.”
It announced the measures in a circular signed by the Director, Trade and Exchange Department, CBN, Dr. Ozoemena Nnaji, titled: “Destination Payment for All Forms M, Letter of Credit and Other Forms of Payment,” dated August 24, 2020 and addressed to all authorised dealers and members of the public.
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.”
Following the sharp drop in the price of oil (the commodity that accounts for over 90 per cent of the country’s export earnings) CBN has recorded steady decline in its foreign exchange reserves, a development that has made it difficult for the apex bank, in recent times, to meet forex demand.
It has thus resorted to introducing measures that are aimed at conserving the reserves. Last month, CBN directed banks to immediately discontinue the processing of Forms M for maize/corn importation into the country, thereby adding maize to its list of 41 (now 44) imported goods and services that are banned from accessing Nigeria’s official Foreign Exchange Market.
