CBN Bans Forex Issuance to Third Parties

Central Bank of Nigeria (CBN) has said that it will no longer approve payment of foreign exchange (Forex) to Forms M applicants whose payments are routed through any buying company/agent or any other third parties.

Dr O.S. Nnaji, Director of CBN’s Trade and Exchange Department, in a statement on Monday, warned authorised Forex dealers to not open Forms M for such applications effective immediately.

He said the measure is part of the apex bank’s efforts to ensure the prudent use of foreign exchange resources, and eliminate incidences of over-invoicing, transfer pricing, double handling charges, and avoidable costs that are ultimately passed on to Nigerian consumers.

“Accordingly, all authorised dealers are hereby requested to only open Forms M for letters of credit, bills for collection and other forms of payment in favour of the ultimate supplier of the product or service,” the memo read.

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Nnaji further announced that the apex bank will immediately introduce a product price verification mechanism to prevent mispricing of goods and services imported into Nigeria, in line with global best practices.

He said all authorised dealers are to use the mechanism to verify quoted prices before Forms M are approved.

Nigeria has recently been hit hard by the scarcity of hard currency caused by the global slump in the price of crude oil, the country’s top foreign exchange earner.

The CBN has struggled to keep up with demand, forcing the apex bank to maintain a stranglehold to prevent further depletion of foreign exchange reserves in the country.