New Telegraph

Customs agents kick over product verification

A move by the Central Bank of Nigeria (CBN) to eliminate incidences of over-invoicing, transfer pricing, double handling charges and avoidable costs through third-party arrangements in Form-M has been opposed by customs agents. BAYO AKOMOLAFE reports

Plans by the Central Bank of Nigeria (CBN) to introduce product price verification have been described by customs agents as a decoy to bring pre-shipment inspection through the backdoor to the Nigerian ports and borders.

Pre-shipment

The pre-shipment inspection of Nigeria’s imports was cancelled by the administration of President Olusegun Obasanjo in 2006, when it was replaced with the destination inspection scheme. The inspection scheme was cancelled due to high cost and inefficiency, as many contraband goods still found their way into Nigeria despite the control instituted in the countries of origin. Speaking for his group, the Vice President of the Association of Nigerian Licensed Customs Agents (ANLCA), Kayode Farinto, explained that the introduced product price verification policy simply meant that the apex bank wants to bring the country back to the pre-shipment inspection era, when the country was already in destination inspection era. He maintained that Nigeria had already entered into various agreements and protocols, like Article 7 of the General Agreement on Tariff and Trade (GATT), which requires six to five principles before a price is agreed, noting that the product price verification implies that the CBN wants to employ an inspector and bring in pre-shipment inspection through the backdoor. The vice president argued that the CBN should be concerned with monetary policy and not fiscal policies, which is the duty of the ministry of finance and the Nigeria Customs Service (NCS).

Issue

The apex bank had explained that it would no longer approve payment of foreign exchange to Form M applicants who do so through a company and agent, thereby eliminating third parties. In a memo by its Director of Trade and Exchange, O.S. Nnaji, it was learnt that CBN would now pay the ultimate provider of goods and services the forex directly. Nnaji noted: “As part of continued efforts by the Central Bank of Nigeria to ensure prudent use of 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 Form M whose payment are routed through a buying company/agent or any other third-parties.” The bank further directed that all authorised dealers had been requested to open Form M for only letters of credit, bills for collection and other forms of payment in favour of the ultimate supplier of the product or service. Nnaji added that in line with best practices around the world, the CBN would introduce a Product Price Verification Mechanism (PPVM) to forestall over-pricing and/or mispricing of goods and services imported into country. Angry with the decision, Farinto said that CBN’s move was usurpation of the powers of the Federal Ministry of Finance and NCS, noting that the ploy by the bank to ban third-party arrangements in Form-M would end up taking away jobs from Nigerians.

Allegation

He said: “Nigeria has already entered into various agreements and protocols, like Article 7 of the General Agreement on Tariff and Trade, which requires six to five principles before a price is agreed. This product price verification implies that the CBN wants to employ an inspector and bring in pre-shipment inspection through the backdoor. Right now, many importers are already confused. “CBN said that to ensure prudent use of 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, they are eradicating third party involvement in Form-M.” Farinto added that whoever signed the circular did not have the interest of Nigerians at heart on the ground that there won’t be third-party involvement in Form-M again. According to him, “Why is CBN dabbling in fiscal policy issues? Why is CBN not focusing on the monetary policy function that is germane to its operation? In the last one year, about 81 items have been on the forex prohibition list, causing many importers not to want to declare what they bring in. “As if this is not enough problems for us at the ports, CBN alters the naira exchange rate at its own whims and caprices. You can wake up tomorrow and the Nigerian Customs Services (NCS) will tell you that the CBN has changed the exchange rate. Now the CBN has banned thirdparty involvement in Form M issuance. This is killing trade and will affect the nation’s import, volume.” Although, he said that outsourcing was acceptable globally but the vice president noted that there was no way importers could do away with third party arrangement with the way global trade currently was, stressing that the CBN policy on Form M would kill a major component of trade and ultimately kill our economy. He said: “What we expect CBN to be doing is to look at how to stabilise our exchange rate, which has been fluctuating in the last four months. “Last year, we were actually using N345 to a dollar to process import declaration. This year, we are now using N361 to a dollar to do the same job.” The vice chairman noted that there were insinuations that the exchange rate would further change to N381 per dollar in the next few weeks, saying that the fluctuation in exchange rate had not been helping trade. For instance, he explained that the CBN product price verification policy simply meant that the bank wanted to bring the country back to the pre-shipment inspection era.

Last line

There is need by CBN, Nigeria Customs Service and Ministry of Finance to sensitise importers and customs agents on how the new policy would promote trade facilitation in Nigerian ports and borders.

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