‘80% of trade misconducts outcome of FX policy distortions’

Despite commending the Central Bank of Nigeria (CBN) on measures to tackle malpractices in foreign exchange transactions, the Centre for the Promotion of Private Enterprise (CPPE) has equally cited most of the misconducts as outcomes of distortions created by the current foreign exchange policy regime, especially, the administrative fixing of exchange rate.

According to the CPPE, a parallel market premium of about 40 per cent offers an incredible incentive for round tripping, brokerage activities and all manner of abuses in the forex market, adding that it is, thus, advisable to address the causes, rather than the symptoms of the problem.

Indeed, the CPPE warned that the recent e-invoicing policy that was introduced by the Central Bank of Nigeria will worsen Nigeria’s already bad international trade transactions process, increase transaction cost, entrench red tape, increase uncertainty, escalate business disruption, weaken investors’ confidence and heighten corruption risk.

According to the Centre, there is no compelling justification for the introduction in the first place, urging the CBN to collaborate with the Nigeria Customs to address any gaps in the valuation processes.

CEO, CPPE, Dr Muda Yusuf, noted that the Director General of the World Trade Organisation, Dr Ngozi Okonjo-Iweala, had last October, expressed worry over the high trade cost in Nigeria, which she said was an equivalent of 306 per cent tariff, which is above the African average.

“Her assertion summarizes the harrowing experience of Nigerian investors in the international trade process.

“There are issues of overlapping regulation, excessive documentation, weak application of Technology, physical examination of cargo, extortion, inadequate cargo handling equipment, stifling bureaucracy, difficult transportation logistics, challenges of access to the ports and weak dispute resolution system. We should therefore be seeking to alleviate the pains of investors in the economy, not exacerbate it,” the CPPE warned.

Indeed, the Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA) had urged the CBN to postpone the date of commencement of its e-invoicing policy to enable operators to get acquainted with the new dispensation.

Similarly, the Manufacturers Association of Nigeria expressed worry that the new e-invoicing guidelines by the CBN may stop manufacturers from deriving maximum value from their exports.

MAN had noted, in a statement that the new regulation was aimed at achieving near-accurate value of imports and exports in Nigeria.

It said, “It says any Form M or NXP that bears a unit price in excess of 2.5 per cent of the verified global checkmate price will not be approved.

“This is concerning as it will checkmate the opportunity of our exporters to derive higher value for their exports. Besides, we are worried about the determination of the global price verification mechanism and benchmark prices.

“What happens if some companies are able to negotiate better prices due to their scale of order and are able to get competitive lower prices? Will these competitive prices be within the benchmark? Clearly, this aspect of the policy will lead to several challenges on valuation down the line, including a floodgate of valuation issues with Nigeria Customs Service.”

Yusuf added that the e-invoice and e-evaluator policy would worsen an already bad international trade transactions process.

“The policy will increase transaction cost, entrench red tape, increase uncertainty, escalate business disruption, weaken investors’ confidence and heighten corruption risk. The truth is that there is a strong correlation between red tape and corruption,” he said.

Yusuf further said that the increasing incursion of the CBN into the trade policy space is an aberration in Nigeria’s economic management system and a serious cause for concern to the business community, citing Issues of import valuation and classification that are statutory functions of the Nigeria Customs Service, with the Finance Ministry as the supervising organ.

He warned that as CBN now undertakes valuation and product price benchmarking of imports and exports It will create an additional regulatory compliance burden and costs for the business community.

He therefore urged the CBN could collaborate with the Nigeria Customs to address any gaps in the valuation processes, rather set up a parallel institutional framework and commends the prompt intervention of the House of Representatives on the matter.