E-Invoicing: CBN’s Good Intentions vs. Manufacturers’ Apprehension

The Manufacturers Association of Nigeria and other members of the organised private sector are apprehensive that the recent CBN’s guidelines on e-invoicing will further stifle their businesses in spite of the apex banks good intentions, writes Dike Onwuamaeze

The new regulation issued on January 21, 2021, by the Central Bank of Nigeria (CBN) on the introduction of e-evaluator and e-invoicing for import and export in Nigeria is causing apprehension in Nigeria’s manufacturing sectors. The e-evaluator and the e-invoicing replaced the hard copy final invoice as part of the documentation required for all import and export transactions.

The CBN said that the new regulations primarily aimed at achieving accurate value from import and export items in and out of Nigeria, which is good enough. It, however, exempted individual invoices with a value of less than $10,000 as long as the suppliers do not have “annual cumulative invoicing value of equal to or above $500,000 or its equivalent in another currency.

It further exempted “import and export made by all security agencies in the country, supplies to diplomatic and consular missions to international agencies dependent on the United Nations; goods directly supplied by a foreign government and donations made by foreign governments or international organisations to foundations, charities and recognized humanitarian organisations.”

But the MAN in its reaction to the new regulation and its guidelines has expressed apprehension that might, “run roughshod on private enterprises.”

The Director-General of MAN, Mr. Segun Ajayi-Kadir, therefore, urged the CBN to suspend the policy guidelines for now and give adequate consideration for a stakeholders’ dialogue to address the concerns. “This is necessary to ensure that government does not inadvertently create a regime of chaos that will decelerate the already low level of activity in the manufacturing sector in particular and the economy in general. We should avoid a situation that will give the regulators a leeway to ride roughshod over private business owners who are already groaning under an inclement operating environment,” Ajayi Kadir said.

He said that though the association appreciated the efforts of the CBN to sanitise foreign trade transactions in Nigeria, there is a “need to ensure that the CBN does not go-ahead to implement the guidelines without accommodating the constructive inputs of stakeholders, especially those whose businesses would be negatively impacted.”

The MAN viewed the 12 days grace given before the implementation of the guideline as hasty. It said: “We noted that the implementation date on the circular is scheduled for February 1, 2022; whereas the guideline itself was issued on January 21, 2022. This is just 11 days of grace before implementation. This is rather hasty. A circular on monetary or fiscal guidelines requires adequate adjustment time. This is more so when it involves international trade and transactions; where a minimum of 90 days allowance of time is normally required, as many operators would have opened Form M and concluded deals either for import or export.”

The MAN is also concerned over the new regulation’s declaration that any Form M or NXP that bears a unit price over 2.5 per cent of the verified global checkmate price would not be approved. It said that this would checkmate the opportunity of its members to derive higher value for their exports.

It emphatically stated that, “we are worried about the determination of global price verification mechanism and benchmark prices.” It then asked: “What happens if some companies can negotiate better prices due to their scale of order and can get competitive lower prices? Will these competitive prices be within the benchmark? This aspect of the policy will lead to several challenges on valuation down the line including a floodgate of valuation issues with Nigeria Customs Service (NCS).”

The MAN is further apprehensive that transmitting the authenticated invoices through the CBN-appointed service provider to the Nigeria Single Window portal could introduce unnecessary bureaucracy with attendant multiple charges. “We already contend with this type of anomaly and could ill afford any addition. It will also be a disincentive to local and foreign investors,” it said.

The manufacturers association also objected to paragraph D of the guidelines, which directed that the content of the electronic invoice authenticated by authorised dealer banks is only advisory for the Nigeria Customs Service (NCS). This implied that the NCS could vary it, probably uplift the FOB when issuing the PAAR, and subject manufacturers to paying unnecessary additional FOB upliftment by the NCS. It pointed out that the CBN might force such importer or manufacturer to reduce its price if it considered it not in conformity with the benchmark pricing.
The MAN also warned that the annual subscription fee charge of $350 per authentication by suppliers on the portal meant to maintain the system has the potential to trigger a run-on Nigeria business by their foreign partners and encourage these suppliers to look elsewhere in the region as well as the continent.

Speaking in the same vein, The Chief Executive Officer of the Centre for the Promotion of Private Enterprise (CPPE), Dr. Muda Yusuf, called for the scrapping of the guideline on e-invoicing and e-evaluator in its entirety, insisting that regulators “should be seeking to alleviate the pains of investors in the economy, not exacerbate to it.”

Yusuf added: “The e-invoice and e-evaluator policy will only worsen an already bad situation. The policy will increase transaction costs, entrench red tape, weaken investors’ confidence and heighten corruption risk. The truth is that there is a strong correlation between red tape and corruption.”

He also expressed concern over the increasing incursion of the CBN into the trade policy space, which he described as, “an aberration in our economic management system and a serious cause for concern to the business community.”
He pointed out that, “issues of import valuation and classification are statutory functions of the NCS, with the Ministry of Finance as the supervising organ. The decision of the CBN to undertake valuation and product price benchmarking is a duplication of this statutory responsibility of the NCS. It will create an additional regulatory compliance burden and costs for the business community.

“We, therefore, submit that the e-evaluator and e-invoicing initiatives be retracted. There is no compelling justification for their introduction in the first place. The CBN could collaborate with the NCS to address any gaps in the valuation processes than setting up a parallel institutional framework.”

Yusuf recalled that only last October, the Director General of the World Trade Organisation, Dr. Ngozi Okonjo-Iweala, expressed worry while addressing the Mid-term Ministerial Performance Review of the federal government over the high trade cost in Nigeria, which she said was an equivalent of 306 per cent tariff.

The CPPE argued that the CBN is merely trying to address malpractices in foreign exchange transactions, which were outcomes of the current distortions in the foreign exchange market, especially the administrative fixing of the exchange rate.

“It is thus better to address the causes rather than the symptoms of this abuse. A market-driven exchange rate will reduce and possibly eliminate these malpractices. Such a pricing framework will also reduce the distractions that the CBN would have to grapple with subsequently,” Yusuf said.

The President of the National Association of Chambers of Commerce, Industry, Mines, and Agriculture, Mr. John Udeagbala, recently called on the CBN to postpone the commencement of this policy so that “transition challenges will lead to chaos with immediate implementation. We also request the CBN to make the operation of these policies cost-friendly.”

The Lagos Chamber of Commerce and Industry (LCCI) also pointed out some issues that would require further attention of the CBN to enable the guideline to achieve its core objectives.

A press statement that was issued by the Director General of LCCI, Dr. Chinyere Almona, said: “Ideally, for a critical change of this nature, there should be a pilot phase to help identify potential challenges and deal with these before the commencement date.”

She observed that issues of legal liability were not clearly stated in the guidelines and pointed out that the mechanism for dispute resolution needs to be articulated.

“The CBN needs to establish an interactive and live customer complaints resolution section within the trade monitoring system to address any bottlenecks that may occur during transactions.

“There is a need to clarify if the subscription fee of $350 is to be paid in Naira equivalence or foreign currency and if in the Dollars, whether affected users will be allowed to source the dollars through the CBN,” she said, adding that “the 2.5 per cent around the vertical prices appears stringent and should be reviewed to about 5.0 per cent given that discriminatory pricing may be a factor.”

The LCCI also noted that the “exemption of imports worth $10,000 appears too low” as no import would be effectively exempted.

It, therefore called for “sufficient transparency and governance around the CBN-appointed agents and authorised dealer banks to ensure adequate independence and supervision.

“Beyond these, consideration should be given to users of this platform that are Small and Medium Scale Enterprises (SMEs). We are also concerned about the potential impact of this new guideline on headline inflation.

“Finally, there should be deeper stakeholder consultation and collaboration with the organised private sector in developing such

The LCCI added that the application of a Global Price Verification Mechanism guided by a benchmark price is also commendable.

It said: “As we transit to a more automated system, there is a need to increase our investment in digital infrastructure to support the innovative digital products that are emerging in the country. We also encourage the federal government to automate more processes to reduce human interface as a way of curtailing corruptive tendencies in our trade chain.”

The chamber also noted that the automation drive should also move to port operations where there are still sensitive procedures done manually with attendant cost burdens on importers and exporters.

“Since the trade sector has shown some level of resilience and has become one of the fastest-growing sectors recording a year-on-year growth rate of 11.90 per cent in the third quarter of 2021 and a contribution of 14.93 per cent to GDP in Q3 of 2021, the government should do more to make the Nigerian trade system more efficient and easier to navigate by all parties.

“This will boost our trade balance and position Nigeria to take advantage of the opportunities offered by the African Continental Free Trade Agreement (AfCFTA) which is expected to gain some momentum this year,” The LCCI said.

The CBN has neither commenced nor postponed the implementation of these guidelines as at press time.