New Directives in the Acquisition of Foreign Exchange from Authorized Dealers in Nigeria.
It was recently announced by the Central Bank of Nigeria through its Authorized Dealers (Banks) that the following regulations will henceforth apply in foreign exchange purchases :-
– In compliance with Ss.85(2),(4) & (5) of the Personal Income Tax Act(as amended), customers applying for the purchases of Forex Forms A(invisible), Form Q(SMEs), & Form M(for letters of credit & bills for collection) are now required to submit their Tax Clearance Certificates (TCCs) evidencing tax payments for 3 preceding the current year of assessment OR a Tax Exemption Certificate.
– Tax Certificates would also be required for sourcing FX-based Personal Travel Allowance and Business Travel Allowance (PTA/BTA) transactions which have been generally reduced to $2,000 from $4,000 by most authorized dealers.
– This is in addition to all existing documentary requirements to be uploaded on the regulatory platform of the CBN.
– These new directives are regulatory compliance requirements aimed at efficiently processing foreign exchange transactions in Nigeria.
Details of the Central Bank of Nigeria Prohibition of Form “M” For Fertilizer Importation in Nigeria.
On the 30th of January,2020, the Central Bank of Nigeria (CBN), pursuant to its earlier circular dated the 10th of December,2018, gave in a subsequent circular the following directions :-
– That an existing ban on the importation of all NPK Fertilizers into Nigeria remains in force.
– That no authorized dealer shall henceforth establish Forms M for the Importation of NPK Fertilizers into Nigeria.
– In view of the foregoing, any authorized dealer that establishes Forms M for the importation of all NPK Fertilizers & any other variant shall be severely sanctioned including the management and staff responsible for the transaction.
– Strict compliance with this circular is required.
Details of the CBN Regulation for the Operation of Indirect Participants in the Nigerian Payments System.
The Central Bank of Nigeria (CBN) on the 11th of November,2019, released a set of regulations pursuant to its jurisdiction to promote sound financial systems in the country for the development of an efficient and effective payments system in Nigeria.
This article will be looking at the provisions of these regulations.
What are the objectives of these CBN regulations?
1). To set out the procedures for effective integration of indirect participants in the payments system in Nigeria.
2). To standardize the operation of indirect participants in the payments system, taking into cognizance their operational risks.
3). To provide a framework for the clearing and settlement of indirect participants payment instruments through the direct participating banks.
4). To strengthen indirect participants for effective contribution to digital financial services in Nigeria.
What are the minimum criteria for indirect participants?
To qualify as an indirect participant, an institution shall :-
- a) have a satisfactory risk-based rating from the CBN & secure a letter of recommendation from its direct participating bank, signed by the Chief Risk Officer and an Executive Director of the direct participating bank;
b). comply with Nigerian Uniform Bank Account Number (NUBAN) standards.
What are the general principles guiding indirect participants as outlined in the regulations?
The general principles outlined in the regulations are as follows:-
– Only direct participating banks are permitted to settle payment obligations of indirect participants.
– An indirect participant shall settle all its payment obligations through only one (1) direct participating bank per payment scheme at any given time.
– The relationship between a direct participating bank and an indirect participant shall be governed by a settlement agreement.
– Where the account of an indirect participant with a direct participating bank is not adequately funded, the direct participating bank may decline further settlement services to the indirect participant and inform the payment processor accordingly.
What are the components of the payments system?
The payments system as governed by these CBN regulations is made up of :-
– Cheque clearing
– EFT & Bulk payments
– Instant payments
– Card Issuance
– Card transaction & acquiring (ATM, POS, Web, etc)
– Portals (e-reference, anti-fraud, e-passport, etc)
– The Bank Verification Number (BVN) system
– Any other component approved by the CBN
What are the obligations of indirect participants under the CBN regulations?
– To comply with applicable provisions of the Nigerian Bankers Clearing System(NBCS) rules.
-To maintain a settlement account/accounts with the direct participating bank wherein the net settlement position of the indirect participants shall be credited or debited as may be appropriate after each settlement session.
– Pledging collateral in an amount as agreed with the directly participating bank which shall serve as security for settlement obligations.
– To pay settlement fees to the directly participating bank annually or as may be agreed by the parties.
How are settlement agreement/indirect participant disputes to be settled?
Indirect participant disputes are to be settled according to the dispute resolution clauses of settlement agreements or if that fails, by recourse to the CBN Dispute Resolution mechanism.
