The Central Bank of Nigeria on Monday announced the ban on the use of Form M for payment of imports into the country through third parties.
In circular tilted ‘Destination Payment for all Forms M, Letter of Credit and other forms of Payment,’ the regulator said the measure was to take immediate effect.
“As part of efforts by the Central Bank of Nigeria of Nigeria to ensure prudent use of our foreign exchange resources, and eliminate incidences avoidable costs that are ultimately passed the average Nigerian consumers, authorized dealers are hereby directed to desist from opening all Forms M whose payments are through a buying company/agent or any other third-party,” CBN said.
“Accordingly, all Authorised Dealers are hereby requested only open Forms M for Letter of Credit, Bills for Collection, and other forms of payment in favour of the ultimate supplier of the product or service. This directive is with immediate effect.
“Additionally, in line with the practices around the world, the CBN will be immediately introducing a Product Price Verification Mechanism to forestall over-pricing and/or mispricing of goods and services imported into the country. All authorized dealers shall use this mechanism to verify quoted prices before Forms M are approved,” it said.
The CBN is currently struggling to merge the multiple exchange rates at play in the country’s foreign exchange market, as part of measures to address a rising foreign exchange crunch.
“Perhaps the policy itself is not totally out of place but the approach is the problem, particularly as the approach may also create greater problems and even exacerbate the FX crisis, as the timing sends a strong signal of scarcity to the market,” one analyst said, in response to the announcement.
