CBN prohibits sale of forex to importers without shipping documents

As part of its current campaign to stabilise the naira, the Central Bank of Nigeria over the weekend said it would sanction any authorised forex dealer who sells the hard currency to importers without necessary supporting documents.

The bank in a circular to all dealers and the general public titled, “Sales of Foreign Exchange without Adequate Documentation Particularly Shipping Documents”, said effective from Friday November 21, 2014, front loading purchase of forex in both RDAS and Interbank would no longer be permitted.

“This is to inform all authorized dealers and the general public that we have observed that some authorized dealers  have been indulging in the sale of foreign exchange of items which are not supported with necessary shipping documents, particularly on open account basis.

“It is therefore important to note that only imports which are backed with evidence of shipment and other relevant documents are eligible for foreign exchange.

“For the avoidance of doubt, only transactions for which letters of credit are cash backed or with matured clean lines or matured bills for collection are eligible for purchase of foreign exchange in the forex market. For the sake of emphasis, “Front Loading” purchase of foreign exchange in both RDAS and interbank shall no longer be permitted with effect from the date of this circular.

“Any infraction whatever of these requirements by any authorized dealer shall be appropriately sanctioned”, it concluded.

The CBN had earlier this month published a guideline, notifying authorized dealers and the general public that funding for selected items initially provided at the biweekly Retail Dutch Auction window will now be funded at the Interbank foreign exchange market.  This is in addition to previous policies designed to ease pressure on the Naira and the foreign exchange reserve. The items excluded, according to the bank, include electronics, finished products, generators, invisibles, telecommunication equipment information technology.

“The excluded items accounted for approximately 58.0% (US$5.8bn) of the capital imported in Q2:2014. This policy will cushion the effect of capital reversal in the medium term and moderately support the accretion of reserve.

However, the anticipated increased demand at the interbank rates, widening the spread between the interbank and official rates further going forward, Afrinvest said in a recent report.

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