Manufacturers demand a review of Central Bank of Nigeria policy

By Joy Obakeye

Manufacturers have kicked against a recent policy of the Central Bank of Nigeria (CBN) on the removal of buying agents/companies or any third parties from accessing its SMIS forex window through FORM M foreign exchange purchases.

In a circular dated August 24, 2020, the apex bank instructed that “authorized dealers are hereby directed to desist from opening of Form M whose payments are routed through a buying company/ agent or any other third parties.”

This effectively eliminates third parties or middlemen from transacting in forex deals in its official SMIS window.

However, Form M is a mandatory documentation process put in place by the Federal Government through the Federal Ministry of Finance (FMF) and the CBN to monitor goods that are imported into the country as well as enable collection of import duties where applicable.

In a statement obtained by Daily Times, the president, Manufacturers Association of Nigeria (MAN), Engr. Mansur Ahmed, noted “the circular released by the Apex bank on its resolve to 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 consumer through directing authorized dealers to desist from opening of forms whose payment are routed through a buying company or any other third parties.”

It went on: “MAN wishes to draw the attention of the apex bank that most manufacturers, especially SMEs deal with accredited agents for their supplies as many Original Equipment Manufacturers(OEMs) abroad do not sell directly to individual buyers.

Furthermore, it is in line with global best practice for OEMs and large International Manufacturing Companies operating in multiple countries and with sourcing needs in various jurisdictions to leverage on the economics of scale to secure lower prices through centralized procurement.”

“If the Central Bank of Nigeria (CBN) is of the view that the audit of the activities of a central procurement agency in terms of price verification is impossible, a phased approach should be adopted to the elimination of their use in Nigeria.

This will enable companies to have sufficient time to re-organize and build the required relationships with original suppliers which they do not currently have.”

Ahmed further explained that to checkmate abuse, the apex bank can put in place a monitoring mechanism framework to ensure that unverifiable claims by some manufacturers are identified and dealt with accordingly rather than stifle the business of genuine manufacturers whose interest and commitment is to grow the economy.

Similarity, the Director-General of Lagos Chamber of Commerce and Industry (LCCI), Dr. Muda Yusuf, said the SMEs were the most vulnerable and would be the first set of casualties of this policy.

He stated: “They do not have the capacity to place huge orders that the main producers or manufacturers would require.

“Many of them currently enjoy suppliers’ credit from the agents from whom they buy, a privilege they would not get from the original product manufacturers. Some enjoy up to six months bills for collection on raw materials imports.

“The liquidity crisis in the foreign exchange market has worsened the perception and country risk of Nigeria in the international trade arena as many foreign payment obligations are not being met.

Some domestic investors have in fact lost their foreign credit lines as a result.

This naturally creates difficulty in doing business with the main manufacturers or suppliers.

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“A market driven forex policy would also incentivize the repatriation of export proceeds.

It is unfair and unjust to compel exporters to offer their proceeds at N380 to dollar when the open market is around N470 to the dollar. This disparity would naturally create compliance issues.

It also contradicts the craving of government to promote export development. Exporters deserve unfettered access to their export proceeds.