The Central Bank of Nigeria (CBN) is highly appalled by the abuse of foreign exchange (Forex) by Nigeria traders. The bank has also said that the misuse of Forex drastically affects the price of commodities purchased by the average Nigerian.
Last Monday, the apex bank released a circular titled ’’Destination payment for all Forms M, Letters of Credit and other forms of payment,” which was authorized by the Director, Trade and Exchange Department, Dr. O. S. NNaji.
“Authorised dealers are hereby directed to desist from the opening of Form M whose payments are routed through a buying company/agent or any other third parties’’ Nnaji said.
The memo stated that all authorized dealers should only open Form M for Letters of Credit, Bills for collection, and other forms of payment in favor of the ultimate supplier of the product or service involved.
Form M is a mandatory document, meant to be completed by all importers of goods into Nigeria. This is currently initiated digitally on a Trade Portal provided by the Central Bank of Nigeria in partnership with the Nigeria Customs Service.
Nigeria spends about US $22 billion yearly on food importation alone, thus, it is very important the CBN takes responsive action to combat any loophole or misappropriation in the forex system.
The pandemic recession and crashing oil prices have seriously affected the economy of Nigeria, likewise the nation’s foreign reserve, which stands at $36.57 billion.
To effectively manage the current foreign reserve, the CBN would need to be very proactive with measures and policies that guide the use of Forex and currency allocation, as the country can’t afford the luxury mistake of financial mismanagement.
To reinforce its goal of eliminating forex abuse, the reserve bank will introduce a product price verification mechanism to prevent over-pricing and mispricing of goods and services, which are imported into the country.
All authorized dealers would have to use the newly introduced platform to verify quoted prices before approval of Forms M.