By Barnabas Esiet.
The Manufacturers Association of Nigeria (MAN) has rejected the new policy of the central bank of Nigeria (CBN) requiring Destination Payment for all Form ‘ M’ letters of credit and other forms of cross boarder payments.
In a statement, the President of MAN, Mansur Ahmed, asked the apex bank to reverse the policy in the overall interest of the country’s manufacturing sector and the economy.
The Apex Bank’s latest policy is intended to among other things; eliminate incidences of over invoicing, transfer pricing, double handling charges and avoidable costs that are ultimately passed to the average Nigerian consumer.
CBN Governor, Godwin Emefiele
Referring to the CBN circular barring authorized dealers from opening of forms M, whose payment are routed through a buying company or third parties to ensure the prudent use of foreign exchange resources, Ahmed, acknowledged the good intention of the Bank, but insisted that such decision is hostile to the survival of many manufacturing concerns that are not involved in unethical practices.
He maintains that additional restriction imposed by the new policy at this time would adversely affect manufacturing activities and the nation’s economy. “We believe that this additional hamstring on the economy is likely to erode the recent improved performance on the ease of doing business ranking especially at a time when the nation is implementing phased gradual ease on lock-down due to Covid-19 pandemic.” The statement read.
Ahmed, explained 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.” He said.
The MAN President warned that absence of central procurement, which allows extended payment timelines by granting credit in periods of foreign currency scarcity, will hamper manufacturers operating in the country and may result in Factory shutdowns.
President of MAN, Mansur Ahmed
“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.” The statement read.
Ahmed, said many companies have already gone into contractual agreements with the procurement agencies for the 2020 financial year and in some cases beyond, adding that default on these contractual obligations lead to expensive lawsuits and disruptions to the production process.
MAN recommends a phased approach to the elimination of a central procurement agency in Nigeria, where the CBN cannot carry out price verification, to enable companies have sufficient time to re-organize and build the required relationships with original suppliers which they do not currently have.
To checkmate abuses, MAN urges the Apex bank 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.