Nigerian banks ramp up dollar rationing
The persistent dollar scarcity in Nigeria and declining foreign exchange reserves have prompted some Deposit Money Banks (DMBs) to review their travel allowance disbursement time frame.
With the latest review, travellers who need dollars for Business Travel Allowance (BTA) and Personal Travel Allowance (PTA) would as from January 2023 be entitled to only two fulfilled requests in a year, as against four times.
The country’s forex market witnessed intensified dollar shortage on Monday, which resulted in further depreciation of the naira at the parallel market, also known as the black market.
Market survey revealed that naira depreciated to N800 per dollar on Monday, the lowest ever at the parallel market as the shortage of the greenback intensified after the Central Bank of Nigeria (CBN) announced plans to redesign the banknotes.
The external reserves of Africa’s largest economy declined further by 1.98 percent month-on-month to $37.49 billion as of October 28, 2022 from $38.25 billion as of September 28, 2022, data from the CBN show.
However, at the Investors and Exporters (I&E) forex window, the naira appreciated by 0.39 percent as the dollar was quoted at N443.00 as against the last close of N444.75. Most foreign exchange dealers who participated at the auction on Monday maintained bids between N425.00 and N447.00 per dollar.
Following the dollar shortages, banks have reviewed the process of fulfilling dollar requests in order to optimise their forex allocation and meet the legitimate needs of more of their customers.
Access Bank, for example, has reviewed upwards the processing and disbursing time frame for international school fees for customers who initiate their request via Access Bank to within 60 days from 30 days previously.
For what was supposed to be consummated within 24 hours after filling out CBN-approved documentation known as Form M, banks pushed it forward to 30 days in July 2022, and to 60 days now.
This however is subject to forex availability, the bank stated this in a notification sent across its customers.
For the rest of the year the bank said travel allowances including BTA and PTA requests will be processed just once for applicants who log their request 14 days prior to travel date.
As from January 2023 however, applicants will be entitled to only two fulfilled PTA/BTA requests a year, and disbursement will always be subject to FX availability, the notice said.
“These changes are designed to meet your needs while optimising our FX allocation as we are committed to serving you excellently at all times,” the bank said. Before now, travellers were getting up to $4,000 as PTA and $5,000 for BTA quarterly.
Responding to the development, Muda Yusuf, chief executive officer of Centre for Promotion of Private Enterprise, said foreign exchange issue is an economy-wide problem that is affecting anybody that has anything to do with the dollar.
He described the forex problem as a distortion in the market, adding that anything related to forex is a problem. “Anything dollar related can be avoided because it is big challenge that cut across sectors.”
Godwin Emefiele, governor of the CBN, had earlier this year hinted of the imminent stoppage of dollar sales to banks.
“If the intended decision is implemented, it will likely result in systemic shocks,” Yusuf said.
Other implications include business disruptions, macroeconomic dislocations and weakening of investors’ confidence, he said.
Some banks had in March 2022 announced the reduction of the monthly spending limit to $20 from $100, while some temporarily suspended the usage of the naira-denominated debt cards for international transactions.
The reason for the development, according to some financial analysts polled by BusinessDay, was the shortage of dollars in Nigeria following a decline in the country’s foreign exchange earnings.
Additional requirements for BTA, according to First Bank of Nigeria, are certificate of business registration/ incorporation, letter of invitation from the overseas business partner stating the purpose and duration of the business trip, and letter of request from the corporate body, addressed to the processing bank, stating the names of beneficiary staff and purpose of the visit.
Access Bank said remittances shall be made directly to the school’s account and that application shall not be more than $15,000 or its equivalent per term/semester. Applicants shall be recognised parents/guardians. They shall present Bank Verification number to the bank and shall present the required document to the banks for processing of school fees such as admission letters, payments invoice, duly completed Form A, and first degree certificates for customers paying for post graduate programmes.
