4th International Trade Show Addis Ababa Ethiopia

NBE Gives New Forex Directives to Ethiopian Banks

NBEOctober 29, 2016 - In a move to regulate the allocation of foreign currency to importers, the National Bank of Ethiopia (NBE) has ordered commercial banks to allocate foreign currencies to importers without restrictions on the number or the value of pro forma invoices submitted by importers and ordered them not to turn away any importer requesting foreign currency.

The additional guidelines issued by NBE compel all commercial banks to at least accept and register any and all forex requests from importers regardless of backlog of foreign currency demand.

In a letter written to all commercial banks dated October 20, NBE laid out additional rules and regulations on the foreign exchange guidelines which each bank had submitted to NBE pursuant to the implementation of the directive issued last February entitled “Directive No. FXD/45/2016: Transparency of Foreign Currency Allocation and Foreign Exchange Management”.

According to the directive, each bank has to devise its own internal forex guidelines in line with the provisions stipulated under the directive. Hence, all banks submitted their draft internal forex guidelines to NBE. After evaluating each guideline, NBE extracted common issues from all the internal documents and communicated these provisions via the October 20 letter.

The new comments issued by the central bank are intended to make sure that the forex rules are uniformly applied across the industry, according to the letter.

The main forex directive, among other things, prohibits banks from allocating foreign exchange collected from an exporter for the import business of same outside of the proper procedures stipulated. The directive also bans the approval of a Letter of Credit (L/C) without collecting a minimum of 30 percent of the value of the L/C in cash up front. Furthermore, NBE has specified priority areas eligible to receive hard currencies on a first-come-first-served basis.

Strengthening the directive, the bank further limited the discretion of commercial banks in allotting hard currencies for customers. In this regard, the comment noted that no bank can refuse any customer, regardless of whether he/she is a client or an account holder or not, from registering to access foreign currency. In fact, the new guideline provides that “having an account with a bank cannot be a pre-requisite for registration”.

In addition, it bars the banks from placing any restriction based on the number or the value of pro forma invoices produced by importers. Hence, access to foreign currency will no longer be attached to any condition as long as the customer complies with the procedures, the letter reads.

However, some banks and importers have challenged the new directive. The issuance of the latest prescription, however, demonstrates that some banks still mismanage the hard currency allocation process. There have been concerns that some banks have managed to bargain with customers while others struggled to meet the demands of the priority areas.

According to the directive, fuel, fertilizers and other agricultural inputs, pharmaceutical products, procurement of machineries and equipment, spare parts, raw materials and accessories, imports of nutritious foods for babies and the likes are some of the areas given priority in forex allocation.

Source: Reporter



Contact News Editor

Name :
Email :
Phone :
Message :
Enter text shown in the above image :

You may also like...