Form ‘M’: Shippers Council May Meet CBN over Protests by MAN, LCCI, Freight Forwarders
• Bello: We are aggregating comments from stakeholders
By Francis Ugwoke
The Nigerian Shippers Council (NSC) may meet the Central Bank of Nigeria (NSC) over its new circular on Form ‘M’ in which it has directed banks to end the era of opening Form ‘M’ in which payment is through third party, agent or buying company.
CBN had in the circular released last week said this was to end decades of over-invoicing and foreign exchange scam through which some importers and other businesses use to secure more foreign exchange allocations from banks.
But the Manufacturers Association of Nigeria (MAN) said the good intention of the CBN was inimical to the survival of many manufacturers who may not be involved in any trade malpractices.
MAN added that most manufacturers, particularly Small and Medium Enterprises (SMEs) go through accredited agents for their supplies, adding that many Original Equipment Manufacturers (OEMs) overseas do not supply goods directly to individual buyers.
Similarly, the Association of Nigerian Licensed Customs Agents (ANLCA) criticised the CBN circular, saying it was aimed at reintroducing pre-shipment inspection of imports through product price verification as against Destination Inspection (DI).
However, the Executive Secretary, NSC, Mr. Hassan Bello in a chat with SHIPPING DAY said the ports economic regulator would be meeting the MAN, Lagos Chamber of Commerce and Industry (LCCI), freight forwarders associations and other stakeholders to aggregate their comments on the new CBN policy on Form ‘M’.
Bello said the Council would after aggregating the views of critical stakeholders, look at what the CBN is doing, explaining that this was because the apex bank has done a lot.
He said, “ Even yesterday (Thursday last week), I was at the Export Promotion Council and this issue came up. But we are still studying the situation and will make appropriate pronouncement”.
The Vice President of ANLCA, Dr. Kayode Farinto, told newsmen that such product price verification policy by CBN would mean that the CBN wants to bring back pre-shipment inspection and do away with DI.
He said what this means is that the CBN would be engaging pre-shipment inspectors through the back door in total disregard to article 7 of the general agreement on tariff and trade which requires five to six principles before a price is agreed that Nigeria has entered into in agreements and protocols.
He also said that the implication of banning third party agreements in Form-M will affect Nigerian imports negatively, but more seriously as many will lose their jobs.
He also said what the CBN wants to do was not its statutory responsibility, adding that should be left for the Ministry of Finance and the Nigeria Customs Service (NCS).
Kayode added, “The CBN said that to ensure 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, they are eradicating third party involvement in Form-M.
“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.
“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 own whims and caprices. You can wake up tomorrow and the Nigerian Customs Services (NCS) 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 last four months. Last year, we were actually using N345 to a Dollar to process import declaration. This year, we are now using N361 to a Dollar to do the same job. As I am talking to you, we are already hearing that it will change to N381 to a dollar in the next few weeks. There is no predictability in our exchange rate, and this is not helping trade.
“The CBN product price verification policy simply means that they want to bring us back to the 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” .
MAN also said many manufacturers had gone into contractual agreements through procurement agencies for the 2020 financial year, adding that any default may lead to expensive lawsuits across jurisdictions.
This the manufacturers added could lead to disruptions to production process that would affect them negatively.
CBN had in the circular signed by the CBN Director, Trade and Exchange Department, Dr. Ozoemena Nnaji, explained that the measure was to ensure prudent use of foreign exchange.
The circular added, “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.”
Form ‘M’ is a mandatory requirement for all imports into Nigeria.
By Francis Ugwoke
The Nigerian Shippers Council (NSC) may meet the Central Bank of Nigeria (NSC) over its new circular on Form ‘M’ in which it has directed banks to end the era of opening Form ‘M’ in which payment is through third party, agent or buying company.
CBN had in the circular released last week said this was to end decades of over-invoicing and foreign exchange scam through which some importers and other businesses use to secure more foreign exchange allocations from banks.
But the Manufacturers Association of Nigeria (MAN) said the good intention of the CBN was inimical to the survival of many manufacturers who may not be involved in any trade malpractices.
MAN added that most manufacturers, particularly Small and Medium Enterprises (SMEs) go through accredited agents for their supplies, adding that many Original Equipment Manufacturers (OEMs) overseas do not supply goods directly to individual buyers.
Similarly, the Association of Nigerian Licensed Customs Agents (ANLCA) criticised the CBN circular, saying it was aimed at reintroducing pre-shipment inspection of imports through product price verification as against Destination Inspection (DI).
However, the Executive Secretary, NSC, Mr. Hassan Bello in a chat with SHIPPING DAY said the ports economic regulator would be meeting the MAN, Lagos Chamber of Commerce and Industry (LCCI), freight forwarders associations and other stakeholders to aggregate their comments on the new CBN policy on Form ‘M’.
Bello said the Council would after aggregating the views of critical stakeholders, look at what the CBN is doing, explaining that this was because the apex bank has done a lot.
He said, “ Even yesterday (Thursday last week), I was at the Export Promotion Council and this issue came up. But we are still studying the situation and will make appropriate pronouncement”.
The Vice President of ANLCA, Dr. Kayode Farinto, told newsmen that such product price verification policy by CBN would mean that the CBN wants to bring back pre-shipment inspection and do away with DI.
He said what this means is that the CBN would be engaging pre-shipment inspectors through the back door in total disregard to article 7 of the general agreement on tariff and trade which requires five to six principles before a price is agreed that Nigeria has entered into in agreements and protocols.
He also said that the implication of banning third party agreements in Form-M will affect Nigerian imports negatively, but more seriously as many will lose their jobs.
He also said what the CBN wants to do was not its statutory responsibility, adding that should be left for the Ministry of Finance and the Nigeria Customs Service (NCS).
Kayode added, “The CBN said that to ensure 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, they are eradicating third party involvement in Form-M.
“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.
“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 own whims and caprices. You can wake up tomorrow and the Nigerian Customs Services (NCS) 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 last four months. Last year, we were actually using N345 to a Dollar to process import declaration. This year, we are now using N361 to a Dollar to do the same job. As I am talking to you, we are already hearing that it will change to N381 to a dollar in the next few weeks. There is no predictability in our exchange rate, and this is not helping trade.
“The CBN product price verification policy simply means that they want to bring us back to the 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” .
MAN also said many manufacturers had gone into contractual agreements through procurement agencies for the 2020 financial year, adding that any default may lead to expensive lawsuits across jurisdictions.
This the manufacturers added could lead to disruptions to production process that would affect them negatively.
CBN had in the circular signed by the CBN Director, Trade and Exchange Department, Dr. Ozoemena Nnaji, explained that the measure was to ensure prudent use of foreign exchange.
The circular added, “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.”
Form ‘M’ is a mandatory requirement for all imports into Nigeria.
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