The complex documentation process required by banks will make it harder for Nigerians to access foreign exchange.
This is according to the Financial Derivatives Company (FDC), Bi-Monthly Update, Volume 11, Issue 11 Issued on August, 2021. “The cumbersome documentation process required by banks will remain a challenge for the public,” the report said
On July 27, the CBN Governor announced a ban on foreign exchange sales to BDCs during the question-and-answer session of the last monetary policy committee meeting.
According to the report, there was a swift reaction by participants in the market. The report stated, “By the next day, the parallel market rate had plunged to N522/$ and then N525/$ as the markets tried to process the implications of the CBN’s decision on businesses. Since then, the naira has gradually appreciated, to currently trade at N508/$ (August 4). Other market rates have also appreciated. For instance, the IATA rate (the exchange rate used by airlines to issue tickets) moved from N460/$ to N412-N413.”
Parallel market convergence with IE FX window
The report predicted that the parallel market premium would subside, resulting in a convergence of rates around the IEFX window.
“Since the CBN is expected to shift the forex supply previously sold to BDCs to the banks, we expect to see an increase in volume and turnover in the banking segment of the forex market, making dollar sales more accessible to the public. This will lead to an appreciation of the exchange rate for invisibles such as PTA, BTA, tuition etc. Also, the parallel market rate depreciation will continue albeit temporarily, leading to a widening of the forex market premium. However, as the market adjusts to the new forex ban, the spike in the parallel market premium will fizzle out, leading to a convergence of rates around the IEFX window.”
What this means
- The increased currency supply from the CBN will help the banks, resulting in an increase in transactions. The lengthy paperwork procedure needed by banks, on the other hand, will continue to be a barrier for the general public.
- If this challenge is not addressed, Nigerians may find it easier to access foreign exchange through the black market operators, which may disrupt the intent of the CBN policy.
I was at a bank on 2nd August to apply for PTA and presented all the document requested. Valid Ticket (confirmed by the bank), copy of passport, visa, filled a form, and wrote a letter of authorization to debit my account. The Visa was at the point of entry and the bank was asking me they did not see the date the visa is expiring (just because it was written in Arabic). Went back and provide additional information to support the Visa and on my departure date (4th August) the bank called that they cannot processed my PTA except if I will go to the Embassy to translate the Visa. I have to leave without the PTA and I’m now wondering if a Visa document is written in Chinese, Japanese or Urdu, the bank will also request a customer to go to the embassy and get the document translated.
I believed the bank is not ready to implement the CBN process and will just frustrate a genuine traveler
You should try the help line provided by CBN for complains. I believe this is going to be the story for most banks. They would do whatever possible to hoard FX from the general public. How would they tell you to go to embassy to translate VISA. They definitely wouldn’t tell their top customers or executives to do that. The aim of this whole rubbish is going to be defeated.
Thanks Ibrahim. I have reported the issue to the bank first and waiting to get an official response. If I didn’t get it or satisfied with the bank response I would report to CBN. If I knew, I would have gone to Jaiz, I know they will not tell me this rubbish. Now I’m out of the country and will be back in October and I intend to follow up, even if it take suing the bank.