Third party peril – The Nation

• While CBN should punish forex abusers, it should protect legitimate dealers

Terrorism is an existential threat. Money laundering, whether or not it feeds terrorism, is no less a threat, on the economic front. So, the Central Bank of Nigeria (CBN) can hardly be faulted for cracking down on corporates and individuals, accused of skewing their forex access, for possible terrorism funding and sundry money laundering.

As at the last count, the apex bank has put no less than 100 of such under its harsh investigative radar, with a view to docking those who have cases to answer, and sanctioning the guilty thereafter.  Again, no right thinking person can question this move. It is legitimate and justified to protect country; and fortify the access of lawful players to legitimate forex.

But the sore thumb, in all these new CBN moves, is the abolition of “Form M” payment, a trading instrument that allows legitimate third party players to access forex, to import critical components for their businesses. It is this spectre of wholesale ban, on a legitimate trading instrument, critical to the business health of many firms, that is rather worrisome.

Newspaper firms, for instance, are no direct newsprint sellers. Or are they basic printing press manufacturers, repairers or servicing firms. Yet, most of the players in this publishing sub-sector are constrained, as third parties, to climb the back of primary players, to source their needs.

The total abolition of “Form M”, as the new CBN directives suggest, seems to block that legitimate route to legal trade. Besides, with COVID-19 crunch, and its long, hard road to recovery in the immediate post-pandemic period, it could make a big difference to business collapse or survival. Any failed business, on that score, can only further drive up household hunger and worsen the already grim economics of the COVID-19  era.

True, the many sins of “Form M” abuse, as veritable diversion of forex to unsavoury causes, are many: over-invoicing is one, in which case the bill is criminally padded to divert forex, from the primary use in the form. The result could be terrorism funding, sundry money laundering or good old capital flight — all draining Nigeria of fair forex it should retain in its economy.

“We are going to continue cracking down heavily on companies in the light of terrorism funding and money laundering,” the CBN was quoted to have said. “So, we want to make sure that all inflows and outflows are through the right channels.”

That is all well said. But the key word is abuse. In light of “Form M”s abolition, what happens to other lawful and legitimate players using the instrument to drive their businesses? That is why the CBN should give further thinking to the new regulations.  Even if “Form M” is abolished — it is only an instrument and nothing is fetish about it — the apex bank should try and open alternative fresh windows for innocent and law- abiding companies the new policy would adversely affect.

The CBN directive that banks submit, to it, the names, addresses and bank verification numbers (BVN) of customers who have defaulted in repatriating their export proceeds, looks like a solid premise to launching a forensic probe. If well done, and not crippled by insider corruption and a suborn of the CBN staff to subvert the process, it could go a long way in separating the straight from the crooked; the innocent from the guilty.

Indeed, such pin-point approaches are the preferred strategy. That way, without any sweeping ban, you could ferret out, and separate the good from the bad boys. If such an approach is routinised, and the process is cleared of insider corruption and allied graft, the process is made all the more efficient, effective and robust.

With COVID-19 and its curtail of international trade and the resultant lower generation of forex, it behoves the CBN to make the distribution of ultra-scarce dollar more efficient and effective. That effective and robust distributive system could well make a big difference, in how fast post-COVID-19 recovery is attained.

But the CBN should be wary of blanket bans that smell more of panic than sure-footed regulation. Panic could corral short-term order.  But in the medium and long run, strategic ruin could lay in wait.

That is again why the CBN must spare a thought for firms the abolition of “Form M” could gore. The innocent cannot be lumped with the guilty. That would be counterproductive — for it is a disincentive to play by the rules.