Forex: CBN relaxes directive on Form ‘M’ payments via 3rd parties

Isola Moses | ConsumerConnect

Contrary to its earlier guideline which disallowed banks from opening Form ‘Ms’ through third parties, the Central of Bank Nigerian (CBN) has issued fresh directives specifying conditions under which it could approve Form ‘Ms’ payment routed through buying companies.

The CBN August 24, 2020, had issued a circular stating that “authorised dealers are hereby directed to desist from opening Forms ‘M’ whose payment are routed through a buying company, agent or any other third parties.”

The Bankers’ Bank, however, Thursday, November 19 issued another circular signed by Dr. Ozoemena Nnaji, Director of Trade and Exchange Department of the CBN.

It stated that internationally recognised buying companies are also accepted as ‘Ultimate Supplier of Goods’.

In other words, banks can open ‘Form Ms’ whose payments are routed through such agents.

The Bank, nonetheless, said it would consider such Form Ms for approval subject to certain conditions.

The circular titled, ‘Re: Destination Payment for All Forms M, Letter of Credit and Other Forms of Payment’ also stated: “Further to the Circular Ref. No. TED/FEM/FPC/GEN/01/005 of August 24, 2020, on the above subject and following different interpretations of the term “Ultimate Supplier of products.

Authorised dealers and the general public are hereby notified of the following clarifications:

“That the provision of “Ultimate Supplier of products” shall be construed to mean “the direct party selling the goods to the Importer Irrespective of whether the party involved is the manufacturer or internationally recognised buying company/ supplier/agent.

“That the name of the “Ultimate Supplier of products” should be the same as the beneficiary on the Form “M’, Invoice, Bill of Exchange, Letter of Credit Instrument and any other relevant document to the transaction.

“That Authorised Dealers should ensure that payments are made only to the beneficiary whose name appears on the documents stated in (b) above.”

The CBN added “that where it is unavoidable that an importer chooses to use a buying company (other than the primary manufacturer), the importer shall make available the following documents (as applicable), for consideration and approval by the CBN before opening Form M.

“Detailed KYC and profile of the buying company; Three-Year Audited Financial Statement of the buying company; Letter of reference from the Buying Company’s banker stating relationship and capacity; Transfer pricing policy & arrangements in the home country. Registration with its home country’s Chamber of Commerce Evidence of tax payments in the home country; Evidence of authorisation to act as agents and/or distributor to the Original equipment manufacturer

“All authorised dealers are to ensure that the list of eligible third parties that meet the requirements above are submitted to the Bank for authentication before on boarding.”

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