CBN’s credit letter directive may affect firms - MAN
The Manufacturers Association of Nigeria (MAN) has called on the Central Bank of Nigeria (CBN) to reverse the circular directing authorised dealers to desist from the opening of forms M through third parties, to avoid massive factory shutdown.
President of MAN, Engr. Mansur Ahmed made the call in a swift reaction to the circular which was released on Monday.
Recall that the CBN circular was 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.
“We believe that this additional hamstring on the economy is likely to erode the recent improved performance on the ease of doing business ranking.”
Ahmed said: “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.“
“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.
He further said the procurement agencies have provided a vital interface between the final suppliers and the manufacturers, and allow 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 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 process and further undermine the resilience of the manufacturing sector.”
Ahmed recommended a phased approach for the elimination of their use in Nigeria to enable companies have sufficient time to reorganise.