Form M: CBN Gives New Conditions to Relax Policy on Third Party Forex Purchase

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The Central Bank of Nigeria (CBN) Tuesday gave new conditions under which the apex bank can now allow opening of Forms ‘M’ for foreign exchange purchases through buying companies or through third party agents.
It would be recalled that the apex bank had in August in a bid to check over-invoicing by some unscrupulous companies and businessmen directed banks to end the policy of opening Forms ‘M’ whose payments were through agents or third parties.
The policy which was criticised by industry stakeholders was to save the scarce foreign exchange for only genuine businesses according CBN.
However, in a circular released Tuesday and signed by the Director, Trade and Exchange Department, Dr. Ozoemena Nnaji, the apex bank came up with new conditions.

In the circular titled “Re: Destination Payment for All Forms M, Letters Of Credit and Other Forms of Payment,” according to THISDAY Correspondent, the bank said there have been different interpretations to its August circular on third party forex purchases through third party agents.
In the new circular, the apex bank said that if importers chose to use third party agents, the details of the agents must be made available.
The CBN also said such agents must have a three year audited finance statement, letter of reference from buying company’s banker showing relationship and capacity.
Part of the circular reads: “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.”
The CBN is also demanding “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” .

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