By JONAH NWOKPOKU

Head of Local Corporates and Trade Products, Transaction Banking, Africa, Standard Chartered Bank, Mr. Onyebuchi Memeh, has said that the adoption of Band Payment Obligation, BPO, in international transaction will improve efficiency and connectivity in the system.

He stated this while delivering a lecture at a workshop organised by International Chamber of Commerce Nigeria, ICCN, in Lagos, on uniform rules for BPO.
BPO is an alternative means of settlement in international trade that provides the benefit of a letter of credit in an automated environment without the drawbacks of manual processing associated with traditional trade finance.

Speaking on, ‘Bank Payment Obligation: General Requirements and Business Considerations’ Memeh highlighted key challenges faced by corporates using traditional trade flows in international transactions. He therefore, advocated the adoption of BPO as it is more efficient and presents opportunities and benefits for both importers and exporters.

According to him, “Open account trade has challenges around insurance coverage. In addition, Letters of Credit blocks corporate limit while negotiation on payment terms are still on-going, leading to inefficient utilisation of credit limits.” He said that the adoption of BPO provides corporates the best of both worlds – the operational efficiency of Open Account with payment certainty of Letter of Credit.

He said, “BPO offers security for open account transactions and brings efficiency to Letter of Credits. It also enhances the Letter of Credit process while addressing Open Account challenges.”

He explained that BPO also offers advantage of electronic presentation of data instead of physical documents, resulting to improved quality and objectivity of compliance verification. It also offers quicker process as it focuses only on data relevant for financing and can be added at any time, for any amount value.”He noted that sellers can gain certainty of the timing of cash flow and can improve liquidity forecasts and may use BPO to get pre-/post-shipment finance through their own bank.”

He further noted that BPO will improve connectivity through faster access to documents to take delivery of goods as physical documents do not need to be examined and may bypass the banking channel. There is also quicker resolution of deviations (Amendments) as both buyer and seller can interact on an online portal, thereby enhancing faster clarification on discrepancies.