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…stops credit payments for imports
……Banks notify customers
The Central Bank of Nigeria (CBN) has directed deposit money banks (DMBs) in the country to stop the processing of milk and its related products on “Bills for Collection basis,” which allowed the importer to buy on credit.
In a circular to DMBs, the apex bank also announced that henceforth, the mode of payment with regard to importation of milk and its related products must be on the basis of Letters of Credit (LC) only.
Analysts said that this means that importers would need to fund their naira accounts and open Letters of Credit.
According to an email a Tier 1 lender sent to its customers informing them about the development, which was sighted by New Telegraph yesterday, the directive is part of CBN’s efforts aimed at streamlining payment modes for food imports.
In a letter dated 26th August, 2019 and titled ‘LETTERS OF CREDIT AS MODE OF PAYMENT FOR THE IMPORTATION OF MILK AND ITS RELATED PRODUCTS’, the Tier-1 bank told its customers that: “As part of efforts aimed at streamlining payment modes for imports, the Central Bank of Nigeria (CBN) has directed all Authorised Dealers to discontinue the processing of imports of milk and its related products on Bills for Collection basis.
“For the avoidance of doubt, the mode of payment in respect of milk and its related products shall henceforth be on the basis of Letters of Credit (LC) only.
……Banks notify customers
The Central Bank of Nigeria (CBN) has directed deposit money banks (DMBs) in the country to stop the processing of milk and its related products on “Bills for Collection basis,” which allowed the importer to buy on credit.
In a circular to DMBs, the apex bank also announced that henceforth, the mode of payment with regard to importation of milk and its related products must be on the basis of Letters of Credit (LC) only.
Analysts said that this means that importers would need to fund their naira accounts and open Letters of Credit.
According to an email a Tier 1 lender sent to its customers informing them about the development, which was sighted by New Telegraph yesterday, the directive is part of CBN’s efforts aimed at streamlining payment modes for food imports.
In a letter dated 26th August, 2019 and titled ‘LETTERS OF CREDIT AS MODE OF PAYMENT FOR THE IMPORTATION OF MILK AND ITS RELATED PRODUCTS’, the Tier-1 bank told its customers that: “As part of efforts aimed at streamlining payment modes for imports, the Central Bank of Nigeria (CBN) has directed all Authorised Dealers to discontinue the processing of imports of milk and its related products on Bills for Collection basis.
“For the avoidance of doubt, the mode of payment in respect of milk and its related products shall henceforth be on the basis of Letters of Credit (LC) only.
“Thank you for your continued patronage.”
The move comes on the heels of the announcement by the CBN Governor, Mr. Godwin Emefiele, at the end of the Monetary Policy Committee (MPC) meeting last month that the regulator would soon restrict access to foreign exchange for importation of milk into the country, since, according to him, there are abundant resources to produce milk in Nigeria.
The CBN governor had stated that: “We believe milk is one of the products that can be produced in Nigeria today. I have asked questions at different forums that we have seen the importation of milk into Nigeria before many of us were born over 60 years ago.
“West African Milk and Freisland Milk have been importing milk into Nigeria for over 60 years. Today, milk imports stand at between $1.2 billion and $1.5 billion annually. That is a very high import product, given that it’s a product that we are convinced can be produced here.”
Urging management of milk companies in the country to support the policy, Emefiele pointed out that local production of milk would reduce persistent clashes between farmers and herdsmen.
However, organised private sector (OPS) players such as the Nigeria Employers’ Consultative Association (NECA) and the Lagos Chamber of Commerce and Industry (LCCI) advised CBN to rethink the decision.
For instance, the Director-General of NECA, Mr. Timothy Olawale, advised the apex bank to suspend the policy and create an environment for further engagement of stakeholders that would enable it weigh the merits and demerits of the plan in the long term.
He said that due to the gap that would be created between local supply and demand, unpatriotic citizens would be importing milk, while government loses revenue with massive job losses and attendant social consequences.
Similarly, LCCI argued that the policy will do more harm than good to investors and the citizenry as it will trigger disruptions in the business environment.
LCCI, through its Director General, Mr. Muda Yusuf, warned that the policy “will create supply gaps in the market with harmful consequences.”
But responding to the criticisms, CBN, in a statement, strongly defended the planned forex restriction for milk imports.
The banking watchdog said there were attempts by some interests, who felt hurt by the planned policy, to mislead the public by misrepresenting the unassailable case for investments in local milk production and the medium to long-term benefits of the planned policy.
Stressing that the country and the welfare of Nigerians come first in all its policies, CBN said: “Our focus remains ensuring forex savings, job creation and investments in the local production of milk. For over 60 years, Nigerian children and, indeed adults, have been made to be heavily dependent on milk imports. The national food security implications of this can easily be imagined, particularly, when it is technically and commercially possible to breed the cows that produce milk in Nigeria.
“For the avoidance of doubt, milk importation is not banned. Indeed, CBN has no such power. All we will do is to restrict sale of forex for the importation of milk from the foreign exchange market. We wish to reiterate that we remain ready and able to provide the needed finance to enable investors who genuinely want to engage in milk production.”
President Muhammadu Buhari told CBN early this month to stop providing funding for food imports. (New Telegraph)
The move comes on the heels of the announcement by the CBN Governor, Mr. Godwin Emefiele, at the end of the Monetary Policy Committee (MPC) meeting last month that the regulator would soon restrict access to foreign exchange for importation of milk into the country, since, according to him, there are abundant resources to produce milk in Nigeria.
The CBN governor had stated that: “We believe milk is one of the products that can be produced in Nigeria today. I have asked questions at different forums that we have seen the importation of milk into Nigeria before many of us were born over 60 years ago.
“West African Milk and Freisland Milk have been importing milk into Nigeria for over 60 years. Today, milk imports stand at between $1.2 billion and $1.5 billion annually. That is a very high import product, given that it’s a product that we are convinced can be produced here.”
Urging management of milk companies in the country to support the policy, Emefiele pointed out that local production of milk would reduce persistent clashes between farmers and herdsmen.
However, organised private sector (OPS) players such as the Nigeria Employers’ Consultative Association (NECA) and the Lagos Chamber of Commerce and Industry (LCCI) advised CBN to rethink the decision.
For instance, the Director-General of NECA, Mr. Timothy Olawale, advised the apex bank to suspend the policy and create an environment for further engagement of stakeholders that would enable it weigh the merits and demerits of the plan in the long term.
He said that due to the gap that would be created between local supply and demand, unpatriotic citizens would be importing milk, while government loses revenue with massive job losses and attendant social consequences.
Similarly, LCCI argued that the policy will do more harm than good to investors and the citizenry as it will trigger disruptions in the business environment.
LCCI, through its Director General, Mr. Muda Yusuf, warned that the policy “will create supply gaps in the market with harmful consequences.”
But responding to the criticisms, CBN, in a statement, strongly defended the planned forex restriction for milk imports.
The banking watchdog said there were attempts by some interests, who felt hurt by the planned policy, to mislead the public by misrepresenting the unassailable case for investments in local milk production and the medium to long-term benefits of the planned policy.
Stressing that the country and the welfare of Nigerians come first in all its policies, CBN said: “Our focus remains ensuring forex savings, job creation and investments in the local production of milk. For over 60 years, Nigerian children and, indeed adults, have been made to be heavily dependent on milk imports. The national food security implications of this can easily be imagined, particularly, when it is technically and commercially possible to breed the cows that produce milk in Nigeria.
“For the avoidance of doubt, milk importation is not banned. Indeed, CBN has no such power. All we will do is to restrict sale of forex for the importation of milk from the foreign exchange market. We wish to reiterate that we remain ready and able to provide the needed finance to enable investors who genuinely want to engage in milk production.”
President Muhammadu Buhari told CBN early this month to stop providing funding for food imports. (New Telegraph)
