NIGERIA – The Central Bank of Nigeria (CBN) has banned commercial banks and other authorised dealers from accepting Bills for Collections as means of payment for milk importation and its related products.
Under the new policy statement, financial institutions were directed by the apex bank to only accept Letters of Credits (LCs) as means of payment for imported milk and milk products.
Financial institutions in the country are expected to discontinue the processing of imports of milk and its related products on Bills for Collection basis, according to a ThisDay reports.
A Letter of Credit is an undertaking by a bank, on behalf of an importer to make payment, provided that the exporter complies with all the terms and conditions stipulated by the credit.
A Bill for Collection is an order by the seller to his bank to collect a certain sum from the buyer against the transfer of the shipping documents. Payment can be made by cash or by acceptance of a Bill of Exchange.
The policy seeks to streamline the mode of payment for importing the products, the bank noted in a letter signed by Director, Trade and Exchange Department, Mr. Ahmed Umar.
“As part of efforts aimed at streamlining payment modes for imports, all authorised dealers are hereby directed to discontinue the processing of imports of milk and its related products on Bills of Collection basis.
“The mode of payment in respect of milk and its related products shall henceforth be on the basis of Letters of Credit only. Please ensure strict compliance,” The CBN said.
The new policy seeks to further augment the country’s efforts of developing the local dairy industry.
As part of the efforts, the bank has also unveiled plans of introducing a new policy that seeks to restrict the sale of foreign exchange to milk importers, with an aim of stimulating investments in local milk production.
As part of the efforts bank recently noted that the new policy seeks to restrict the sale of foreign exchange to milk importers with an aim of stimulating investments in local milk production.
According to the bank, Nigeria spends about US$1.2 billion to US$1.5 billion per year on milk imports which it says could be better used in diversifying the economy away from oil.