Form “M’: LCCI Appeals for Review of CBN Decision

The Lagos Chamber of Commerce and Industry (LCCI) has appealed to the Central Bank of Nigeria (CBN) to review its new directive on payments for imports in the interest of the Nigerian economy.
Dr Muda Yusuf, Director-General LCCI made the appeal in a statement on Sunday, in Lagos.

Yusuf said the appeal became pertinent following the devastating shocks businesses were undergoing, especially with the coronavirus pandemic.
Recall that the CBN had, on August 24, issued a circular on a new directive as part of continued efforts to ensure prudent use of the nation’s forex resources and eliminate incidences of over-invoicing.
It said this was also to eliminate transfer pricing, double handling charges, and avoidable costs ultimately passed to the average Nigerian consumers.
The bank, in the circular, directed authorised dealers to desist from opening of Form M whose payments are routed through a buying company/agent or any other third parties.
Form M is a mandatory statutory document to be completed by all importers for importation of goods into Nigeria.
The CBN requested all authorised dealers to only open Form M for Letters of Credit, bills for collection and other forms of payment in favour of the ultimate supplier of the product or service.
It said that in line with best practices, the CBN was introducing a product price verification mechanism to forestall over-pricing and/or mispricing of goods and services imported into the country.
The bank said all authorised dealers should use the mechanism to verify quoted prices before Forms M are approved.
The LCCI DG, however, said the policy measure would create more problems than it would solve, as already, most foreign exchange transactions had been frozen on account of the directive by the CBN.
He said it would cause disruptions on over 80 per cent transactions by the business community.
According to him, this negates the efforts of the government on improving the nation’s ease of doing business ranking.
Yusuf said it was impractical to expect all importers of raw materials, equipment, and other inputs to buy directly from the ultimate producer, manufacturer, or supplier, especially in an economy driven by Small and Medium Enterprises (SMEs).
“While the Lagos Chamber of Commerce appreciates the efforts of the CBN in curbing abuses in the foreign exchange market, this policy measure would create more problems than it would solve. What this means is that the supply chain of over 80 per cent of the business community has once again been disrupted and dislocated. This is like substituting the global supply chain problem with a domestic supply chain disruption. Even in the domestic economy, distributors and dealers form the bridge that connects the major manufacturers to the retailers and consumers. Middlemen play a critical role in the supply and distribution chain in any economy, domestically and globally, as they bring a great deal of value to the process. We urge the CBN to please review this new policy on payments for imports to save the already ailing and distressed Nigerian economy from complete collapse. This policy negates the current laudable efforts by the government [and even the CBN itself] to ensure business continuity, sustainability and recovery. It is also in conflict with the letters and spirit of the Economic Sustainability Plan of the Federal Government”.
Furthering his case for consideration of SMEs, Yusuf said they were the most vulnerable and would be the first set of casualties of this policy.
Yusuf said the SMEs lacked the capacity to place huge orders that the main producers or manufacturers would require.
He said many of them currently enjoyed 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 LCCI chief referred to the current challenges in the foreign exchange market and the associated infractions, which he said were symptoms of the policy shortcomings in the management of foreign exchange market.
“There is high degree of uncertainty which fuels speculation; there is a high component of forex demand driven by the arbitrage opportunities which differential rates offer. There is the component of demand driven by accumulation of inventories of raw materials caused by the current opacity in the market; there is the desperation of the non-resident portfolio investors to exit the Nigerian economy. The proposal on price verification would amount to another layer of bureaucracy with the attendant problems that comes with such bottlenecks. Once the exchange rate management framework is right, it would be absolutely unnecessary to introduce another hurdle of price verification. Therefore, the policy response should be situated in the context of these underlying conditions”.