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CBN reviews position on payment for imports via agents/suppliers

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By Samuel Bankole

The Central Bank of Nigeria (CBN) on Thursday issued a clarification circular on its position on its circular in August which directed banks not to open import documents, Forms M for importers who route their bills through third parties.

In a fresh circular on Thursday, the regulatory bank said the “Ultimate Suppliers” of products shall be construed to mean ‘the direct party selling the goods to the importers irrespective of whether the part involved is the manufacturer or internationally recognized buying company/supplier/agent.”

The regulatory bank in the August circular barred banks from approving payment for importation routed through agents by the importers in its bid to prevent over-invoicing and round-tripping.

The new circular stated that the name of the ‘Ultimate Supplier of products’ should be the same as the beneficiary on the Form M invoice, Bill of exchange, Letter of Credit instrument and any other relevant document to the transaction.

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The CBN said banks should ensure that payments are made only to the beneficiary whose name appears on the import documents approved by the lender.

“That where it is unavoidable that an importer chooses to use a buying company (other than the primary manufacturer) the importer shall make available the details” of KYC-Know Your Customers and profile of the buying company before the approval of the CBN can be obtained.

Other documents the CBN requires from the agent and supplier include three years audited financial statement of the buying company, a Letter of reference from the buying company’s banker stating relationship and capacity, transfer pricing policy and arrangement in the home country.

Other documents required include registration with its home country’s chamber of commerce, evidence of authorization to act as agents and /or distributors to the original equipment manufacturer.

In the previous circular, the CBN said Form M should only be opened for letters of credits, Bills for collection and other forms of payment in favour of the ultimate supplier of the product or service.

The regulator said the measures will ensure prudent use of foreign exchanger resources and eliminate incidences of over-invoicing, transfer pricing, double handling charges, which ultimately are passed to Nigerian consumers.

Analysts said apart from the measure helping to check over-invoicing by importers, it will also curb foreign exchange arbitraging by who deployed the system to access more than needed foreign currencies from the bank.


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