Business

Evaluating OPS’ grouse with Form M policy

The new directive on Form M by the Central Bank of Nigeria (CBN) directing that letters of credit, bills for collection and other forms of payment should only be opened in favour of ultimate supplier of a product or service has caused a stir in the business community despite its importance in curbing forex abuse. Taiwo Hassan reports

Indeed, the World Bank’s 2020 Doing Business Report Assessment that showed that Nigeria moved 15 places to 131st from 146th position last year has shown that the business community still needs to do more even amid policy and regulation constraints. In fact, the regulatory framework and policies of the present administration have been detrimental to taking the country’s manufacturing sector to the promised land despite the presence of Presidential Enabling Business Environment Council (PEBEC). Ideally, it has been a tough terrain for the business community to operate effectively and efficiently in the without one challenge or the other. The latest in this regard being is CBN’s circular on opening of Form M for letters of credit, bills for collection and other forms of payment by importers and manufacturers at a period the profound impact of COVID-19 crisis is yet to abate.

MAN’s position on CBN circular

With the policy, the apex bank resolves 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 to the average Nigerian consumer through directing authorised dealers to desist from opening of Form M, whose payment are routed through a buying company or any other third parties. In its reaction, the Manufacturers Association of Nigeria (MAN) acknowledged the good intention of the bank, but noted, however, that the impact of such decision was inimical to the survival of many manufacturing concerns that are not involved in unethical practices, especially at a time the nation is implementing phased ease on lockdown due to COVID-19. The president of MAN, Engr. Mansur Ahmed, said that this additional hamstring on the economy was likely to erode the recent improved performance on the ease of doing business ranking, thus advising the apex bank to reverse its decision with immediate effect. Ahmed said: “MAN wishes to draw the attention of the apex bank that most manufacturers especially SMEs deal with accredited agents for their supplies as many Original Equipment Manufacturers(OEMs) abroad do not sell directly to individual buyers. “Furthermore, it is in line with global best practice for OEMs and large international manufacturing companies operating in multiple countries and with sourcing needs in various jurisdictions to leverage on the economics of scale to secure lower prices through centralized procurement.” Besides, the MAN president said in Nigeria, central procurement played a critical role in the production process, an absence of same will hamper manufacturers operating in the country and may result in factory shutdowns. To him, in the absence of a global procurement agency, most companies would not have access to the final suppliers, who consider the inherent country risks a disincentive for trading directly with companies in Nigeria. He added that the procurement agencies had provided a vital interface between the final suppliers and the manufacturers, and allows same extended payment timelines by granting credit in periods of foreign currency scarcity. “It is pertinent to point out that many companies have gone into contractual agreements via the procurement agencies for the 2020 financial year and in some cases beyond. Default on these contractual obligations may result in expensive lawsuits across jurisdictions, bring disruptions to the production pro-cess and further undermine the resilience of the manufacturing sector. “Consequently, the multiplier effect on the economy will be reduction in productivity; loss in business revenues; supply chain disruption and ultimately and loss of employment,” the MAN president stated. Similarly, to checkmate abuse, he noted that the apex bank could put in place a monitoring mechanism framework to ensure that unverifiable claims by some manufacturers are identified and dealt with accordingly rather than stifle the business of genuine manufacturers whose interest and commitment is to grow the economy. “Given the prevailing extremely stressful operating environment our fragile manufacturing sector is contending with, the implementation of this new directive is like hammering the last nail on the coffin of many of our ailing members. “MAN, therefore, urges the CBN to reverse this policy in the overall interest of the Nigeria manufacturing sector and the economy in general.”

LCCI’s position

Similarly, MAN’s counterpart in the private sector business community, the Lagos Chamber of Commerce and Industry (LCCI), also thread same path, warning the CBN of consequential damages to the country’s fragile economy if the policy is not reversed in time. LCCI Director-General, Muda Yusuf, said that the policy would create more problems than it will solve. Yusuf pointed out that most foreign exchange transactions had already been frozen on account of this circular, adding that what this means is that the supply chain of over 80 per cent of the business community had once again been disrupted and dislocated. Accorfing to him, this is like substituting the global supply chain problem with a domestic supply chain disruption. The LCCI DG stated that it was not practical to expect all importers of raw materials, equipment, and other inputs to buy directly from the ultimate producer, manufacturer, or supplier, especially in an economy driven by SMEs.

Last line

With MAN and LCCI’s stance on the Form M policy, the apex bank should and the business community should seek a common ground for mutual resolution.

SHOCKING LIFE STORY!!!

Abuja Man reveals (FREE) secret Fruits that Increased his Manhood size and Lasting Power in 5days…

CLICK HERE TO GET IT!!!

%d bloggers like this: