The Central Bank of Nigeria (CBN) through circular titled ‘Destination Payment For All Forms M, Letters Of Credit And Other Forms Of Payment’ said the moved to end the age-long practice of over-invoicing in operating businesses by the operators leading leakages in the nation’s forex.
In circular no TED/FEM/FPC/GEN/01/005 dated August 24, 2020 which was endorsed by Dr Ozoemena Nnaji, Director of the Trade and Exchange Department of the CBN was addressed to all Authorised Dealers/ General Public saying “directing banks and other authorised dealers to desist from opening Forms ‘M’ whose payment are routed through a buying company, agent, or other third parties.
The CBN disclosed further that as part of continued efforts by the Central Bank of Nigeria to ensure prudent use of our foreign exchange resources and eliminate incidences of over- invoicing, transfer pricing, double handling charges, and avoidable costs that are ultimately passed to the average Nigerian consumers, Authorised Dealers are hereby directed to desist from opening of Forms M whose payment are routed through a buying company/agent or any other third- parties.
CBN therefore directed that 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. This directive is with immediate effect.
“Additionally, in line with best 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.
CBN said that “all Authorized Dealers shall use this mechanism to verify quoted prices before Forms M are approved. Please ensure strict compliance.”
According to CBN’s website, Over-invoicing of imports with $35.597 billion as of August 20 has been attributed to as a major drain on the nation’s external reserves.