In a decisive move to address the impact of global inflation and enhance the efficiency of foreign exchange utilisation in Nigeria, the Central Bank of Nigeria (CBN) has significantly revised the allowable deviation limits for the Price Verification System (PVS) used in monitoring the pricing of exports and imports.
This development was announced through a circular released by the apex bank, underscoring its commitment to safeguarding the economy from price manipulation activities that could exacerbate the foreign exchange crisis.
The circular, signed by Dr Hassan Mahmud, the Director of the Trade and Exchange Department at the CBN, outlines the adjustments made to the PVS, a mechanism initially designed to combat the financial malpractices of over-invoicing imports and under-invoicing exports.
From 2.5% to 15%
Previously, the system flagged any declared prices of import items that exceeded global average prices by more than 2.5%.
However, acknowledging the challenges posed by persistent global inflation, the CBN has now expanded the deviation limits for both exports and imports.
Effective immediately, the new regulation permits a deviation of up to -15% and +15% from the global average prices for exports and imports, respectively.
This adjustment represents a 500% increase in the allowable limit for price verification. The CBN believes this measure will provide more flexibility in the face of fluctuating global prices while preventing the exploitation of the system.
What the Circular says
The circular read:
- “Following the implementation of the Price Verification System (PVS) to curb over-invoicing of imports and under-invoicing of exports, the CBN in a circular referenced TED/FEM/FPO/PUB/01/001 stated that declared prices of import items that are more than 2.5 percent above the global average prices of the referenced item will be queried.
- “However, due to global inflation and other related challenges, the CBN has reviewed the allowable limit of price deviation for exports and imports to -15% and +15% of the global average prices, respectively.
- “Authorized Dealer Banks and the general public are hereby advised to note and comply accordingly.”
More Insights
- The CBN recently rolled out its PVS portal in a significant development to bolster transparency and accountability in Nigeria’s banking and trade sectors. This strategic move, announced in August 2023, follows a successful pilot phase and comprehensive training sessions with Nigerian banks, marking a new era in trade documentation and financial transactions within the country.
- Effective August 31, 2023, the CBN mandated that all applications for Forms M, a crucial component in Nigeria’s importation documentation process, must now include a valid Price Verification Report. This report is to be obtained exclusively from the CBN’s Price Verification Portal, a platform designed to standardise and authenticate the prices of goods and services involved in trade operations.
- To enforce this new requirement, the CBN has issued a strong directive to all authorised dealer banks, instructing them to ensure their customers are fully informed about securing a Price Verification Report for all Form M applications. The central bank has made it clear that any deviations from this protocol or instances of non-compliance will be met with appropriate sanctions.
- In the latest circular, the CBN has clarified that the purpose of the PVS is not to fix the actual prices of items for tariffs or duties imposed by the government. Instead, its goal is to curb the excessive outflow of the nation’s limited foreign exchange resources through practices such as over-invoicing and other forms of price manipulation.
- By recalibrating the PVS in response to the current economic realities, the CBN aims to strike a balance between maintaining stringent controls over foreign exchange transactions and allowing businesses the flexibility to navigate the complexities of international trade amidst global price volatility. This initiative is part of the broader efforts by the Nigerian government to stabilise the economy, protect the value of the Naira, and ensure the sustainable growth of the country’s financial sector.