A friend was going traveling out of the country for the Xmas holiday with his family. It is a yearly ritual for them as they hop from one continent to the other every other year. This time they were going to Dubai and since he was going with his wife three kids, house help and sister he felt he would need at least $10,000 to ensure he won’t be cash strapped while away. As usual he called his guy at a popular hotel on the island for $10,000 on the day he was traveling. To his amazement a dollar was now going for N170. Just a month ago, he had purchased from the same old guy at N165. His procrastination has probably cost him about N50,000 he thought.
The exchange rate in Nigeria is has been in the news recently as the Naira faces major depreciation against the dollar. Most blame this to the recent CBN policy of replacing the WDAS for the RDAS in Nigeria. The CBN in a bid to defend the Naira against dollar took on this drastic measure. In fact, they also put a limit to how much Bureau De Change buy and sell Forex and who they sell to or buy from. These have all put enormous pressure on the exchange rate. Thankfully, these pressures and widening depreciation of the Naira is mostly in the parallel market. Had, Victor known about this he would have opted for one or some of the following options.
BTA/PTA – Business Travel Allowance (BTA) and Personal Travel allowances (PTA)are both official forms for individuals to purchase forex from through the banks. BTA are for business travelers who require travel allowance in Forex. Currently, the limit here is $5,000 per quarter or $20,000 per annum and rather than buying it at the parallel market rate of say N170 to the dollar you pay about N161 (the interbank rate) for it. PTA is for holiday makers and is $4,000 per quarter and $16,000 per annum and can also be purchased at the official inter bank rate.
Naira Debit & Credit Cards – Our ubiquitous ATM cards is now also accepted in nearly 200 countries in the world. What this means is that rather than travel with Forex in your pocket, all you simply do is to get to your destination abroad find an ATM and withdraw the cash in Forex. The bank simply just debits your Naira account back home using the official interbank rate. For example, had Victor withdrawn $1,000 he would have been debited N161,000 instead of the N171,000 he would have spent had he bought it from the parallel market. The CBN also recently raised the withdrawal limits from $40,000 per annum to $150,000 per annum for transactions done with your Master Card/Visa Card Naira debit or credit cards. Based on the current gap in exchange rate between Interbank and Parallel market you can save as such as N1.5million per annum
Online Payment Platforms – Our local Naira debit cards (Master & Visa) can also be used to make payments for online purchases. As such, a lot of online purchases that you need to make locally or when abroad can be done from the comfort of your hotel room using your laptop. For example, I purchased an item from an online platform for $10.17 and was charged the Naira equivalent of N1,619.70 which translates to an exchange rate of N159.2/$1. Apart from saving from exchange rate cost you also save time and convenience.
P.O.S Machines – For frequent shoppers abroad, the era of paying for your purchases via cash may soon be over as most shops, malls, hotels etc. all accept Nigerian Debit or Naira cards (Mater Card/Visa). Rather than pay with cash, all you do is just swipe your cards at the available P.O.S machines and you get debited in Naira at your local bank here in Nigeria. I have used this severally in the past year and have found it very convenient. It works so well, you can use it to pay for just about anything provided there is a P.O.S machine available for you to swipe. Just like the other tips mentioned above, you will also be charged the prevailing interbank rate at the time of transaction.
Payment for Imports by Small Businesses – Small time importers of unregulated items can also access the interbank market for dollar purchases to the maximum of $250,000 per annum. All you need to do is to fill a eForm M and support it with a proforma invoice from your suppliers abroad. $250,000 translates to about $20,830 monthly and should be just about enough to support small business who frequently import items. As above, you need not pay using the black market rate as you are also able to access the interbank market and at the interbank rate. This can save businessmen massive amount of money on forest cost.
With all this options available I see no reason why anyone with a legitimate need for Forex should bother about black market rates with all the options available. I do agree black market rates do provide a convenient option due to demand of time and the speed at which it is consummated. However, be ready to incur huge exchange rate cost and quite frankly you have no one else to blame.