Economy: CBN Directs Banks to Adopt Official FX Rate for Cross-Border Payments

PAPSS which is a centralised payment and settlement infrastructure for intra-African trade and commerce payments, was developed by the African Export-Import Bank (Afreximbank) in partnership with the West African Monetary Institute (WAMI).

CBN gave the directive in a circular introducing the guidelines on operations of PAPSS in Nigeria, recently signed by Ozoemena Nnaji, CBN’s director of trade and exchange department.

The I&E FX window is the market trading segment for investors, exporters and end-users that allows for FX trades to be made at exchange rates determined based on prevailing market circumstances.

Currently, naira trades between N410 and N411 at the market — which the CBN had adopted as the country’s official rate.

By implication, intra-African businesses will need CBN’s approval for banks to convert rates at the prevailing I&E FX rate for cross border payments and transactions.

The circular reads, “All authorised dealers are required to ensure that prevailing exchange rate at Investors and Exporters Forex Window as advised by Financial Markets Department, FMD, should be used in cross-rates conversion between Naira, United States Dollars and third currencies within Africa, for outbound payments and vice-versa for inflows”.  “The request for approval should be forwarded to the Director, Financial Markets Department, CBN.

“That eligible payment of imports and receipt of export proceeds by the CBN shall be restricted to trade-backed transactions only and that the documentation requirements stipulated in Memorandum 9 and 10 of the Foreign Exchange Manual (2018) and other extant circulars shall apply. Import payments shall also be restricted to goods of African origin.”

According to the circular, all the required documentation should be provided before a transaction is initiated on PAPSS by authorised dealers and their customers.

It further noted that export proceeds repatriated to CBN under PAPSS shall be subject to certification by respective processing banks as being repatriated by the exporter.

The circular added that the provisions of all existing guidelines, circulars, and directives on the operations of foreign exchange market shall apply. The CBN, however, stated that only eligible transactions as may be determined by the central bank from time to time shall be eligible for payment on PAPSS. “Items classified ‘not valid for Foreign Exchange’ shall remain ineligible,” the circular adds.

“This saw an increase in the contribution of the MDAs by over N400 Billion.

“It is my view that MDAs can contribute to the Federation account much more than that. This policy should be expanded and deepen to cover more MDAs.”

Speaking further, he said, “Mr President, the need to enhance revenue generation and collection cannot be overemphasized.

“The level of budget deficit is high, and both the Legislature and the Executive should work to reduce this deficit through the availability of more revenues.

“I must commend the Senate and House Committees on Finance and the Ministry of Finance, Budget and National Planning for working together to improve the level of revenues for the government.”

“Mr President, we understand that due to paucity of revenue, the Federal Government has to resort to raising funds from foreign and domestic sources to provide infrastructure across the country. That is why, the National Assembly approved the requests for borrowing.

“The Commitment of the Federal Government in providing infrastructure across the country means that the funds must be raised one way or the other.

“Government should also explore other sources of funding its projects in order to reduce borrowing”, the Senate President advised.

On the timely consideration of the 2022 budget, Lawan said that the Ninth Assembly remains committed to sustaining the January to December budget timeline hitherto reverted to after its inauguration.

He recalled that the early passage of the 2020 and 2021 budget helped Nigeria to deal with the economic recession it faced as a result of the COVID-19 pandemic.

Baring his thoughts on the security situation in the country, Lawan advocated for adequate funding of security agencies in the 2022 budget.

“Mr. President, the security of lives and property of Nigerians is still a challenge.

“The National Assembly is ever willing to work with the Executive arm of Government to continue to work for better security for our citizens.

“The recent changes in the leadership of the armed forces is a clear testimony of the collaboration between the Legislature and the Executive to overhaul the security architecture for better outcomes in our fight against the myriads of security challenges.

“Mr President, the recent passage of the supplementary budget 2021 that appropriated over eight hundred billion naira to our security agencies is a commendable step in the right direction.

“Federal Government should therefore continue to provide more resources to our security agencies to sustain the gains made so far.”

The Senate President assured that the National Assembly would pass the 2022 Appropriation Bill before the end of this year.

Source: newsblast

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