CBN Moves to Relax Third Party Forex Purchase Policy

19 Nov CBN Moves to Relax Third Party Forex Purchase Policy

The Central Bank of Nigeria (CBN) has said it would relax its third part foreign exchange policy to allow the opening of Forms ‘M’ by companies whose forex payments are routed through a buying company, agent, or other third parties. But that would be under certain conditions.

The CBN outlined the terms in a circular titled: “Re: Destination Payment for All Forms M, Letters Of Credit and Other Forms of Payment,” signed by its Director, Trade and Exchange Department, Dr. Ozoemena Nnaji,

According to the CBN, since the release of its August 24, 2020, circular on the subject, there have been different interpretations of the term ‘ultimate supplier of products,’ which it stated also required interpretation.

In the latest circular, it stated that “where it is unavoidable that an importer chooses to use a buying company (other than the primary manufacturer), the importer shall make available detailed Know-Your-Customer (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; among other documents for its approval before opening Form M.”

Other requirements included that the company must have transfer pricing policy and arrangements in the home country; registration with its home country’s Chamber of Commerce; evidence of tax payments in the home country; and 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 onboarding. Please note and ensure strict compliance,” it added.

According to the CBN, the provision of ‘ultimate supplier of products’ in the previous circular 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”.

“Authorised dealers should ensure that payments are made only to the beneficiary whose name appears on the documents stated above,” it said.

A Form M is a mandatory statutory document to be completed by all importers for the importation of goods into Nigeria. It is mandatory for all importers to complete and register Form ‘M’ with authorised dealers at the time of placing orders.