New CBN forex restriction will kill ailing firms, MAN warns
Local manufacturers have kicked against directive by the Central Bank of Nigeria (CBN) that dealers should stop opening form M for payments that are routed through a buying company or any other third party.
According to the Manufacturers Association of Nigeria (MAN), the good intention of the apex bank is inimical to the survival of many manufacturing concerns that are not involved in any unethical practices, especially at a time when the nation is implementing gradual ease of the lockdown caused by the coronavirus pandemic.
MAN noted 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.
Specifically, the association said many companies had gone into contractual agreements via the procurement agencies for the 2020 financial year and, in some cases, beyond, hence, a default on the contractual obligations may result in expensive lawsuits across jurisdictions, bring disruptions to the production process and further undermine the resilience of the sector.
“Consequently, the multiplier effect on the economy will be reduction in productivity, loss in business revenues, supply chain disruption and ultimately loss of employment,” the local producers said.
The CBN had, in a circular titled “Destination Payment for All Forms M, Letter of Credit and Other Forms of Payment” on Monday, taken the decision in a bid to ensure prudent use of foreign exchange, by eliminating incidences of over invoicing, transfer pricing, double handling charges and avoidable costs that are ultimately passed to the average Nigerian consumer
A Form M is a mandatory statutory document to be completed by all importers for the importation of goods into Nigeria. It is mandatory for all importers to complete and register Form ‘M’ with authorised dealers at the time of placing orders.
MAN President, Mansur Ahmed, argued that a phased approach should be adopted to enable companies to have sufficient time to re-organize and build the required relationships with original suppliers, which they do not currently have.
He advised that to checkmate abuse, the apex bank could put in place a monitoring mechanism to ensure that unverifiable claims by some manufacturers are identified and dealt with accordingly, rather than stifle the business of genuine firms whose interest and commitment is to grow the economy.
“Given the prevailing extremely stressful operating environment our fragile manufacturing sector is contending with, the implementation of this new directive is like hammering the last nail into the coffin of many of our ailing members,” he said.
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