The recent operational changes implemented by the Central Bank of Nigeria (CBN) in the foreign exchange (FX) market will have an impact on Nigerians seeking to travel or pay for their school fees.
Under the new changes, the CBN has abolished segmentation in the FX market, collapsing all segments into the Investors and Exporters (I&E) window.
Although the operational changes have collapsed the different segments, the CBN aims to ensure that essential needs like medicals, school fees, Business Travel Allowance/Personal Travel Allowance (BTA/PTA), and SME transactions are not disrupted and can be smoothly processed through the deposit money banks.
This will allow individuals to access the necessary foreign exchange for these specific purposes without major changes or disruptions in the process.
What this means
For Nigerians intending to travel, the process of accessing foreign exchange for their travel needs will remain unchanged.
This includes applications for specific purposes such as medical expenses, school fees, BTA/PTA, and Small and Medium Enterprises (SMEs) which will continue to be processed through deposit money banks (Commercial banks and other banks that collect deposits).
- While they will still be able to apply for BTA/PTA through deposit money banks as they have done previously it will not be at the fixed CBN rate (as it previously was) but at rates determined by the markets.
- The rate you buy today might be different from the rate you buy tomorrow or at any other rate. It is subject to the market price at the Investor & Exporter window.
- Similarly, individuals paying for medical expenses or school fees abroad will continue to process their applications through the banks.
- It is unclear if processing will be via the official portal created by the central bank for processing forex payments for PTA, BTA, etc.
Possible Implications
The operational changes implemented by the Central Bank of Nigeria (CBN) in the foreign exchange (FX) market may have implications for the purchasing power of Nigerians seeking to travel or pay for their school fees.
- With the abolition of segmentation and the consolidation of all segments into the Investors and Exporters (I&E) window, there may be changes in the availability and pricing of foreign exchange.
- The new system, guided by the “Willing Buyer, Willing Seller” model, aims to enhance efficiency and transparency in the FX market.
- The impact on purchasing power and costs can be influenced by several factors, including the supply and demand dynamics of foreign exchange, market sentiment, and prevailing exchange rates.
- It’s important to note that the foreign exchange market is subject to fluctuations and can be influenced by various economic and external factors.
In the context of travel expenses, if there is increased demand for foreign currency compared to its supply, it may result in a higher cost of obtaining foreign exchange.
- This could potentially affect the purchasing power of individuals seeking to travel, as they may need to allocate more of their local currency to acquire the necessary foreign currency for their travel expenses.
- Similarly, for individuals paying for school fees abroad, any changes in the availability or pricing of foreign exchange may have an impact on the cost of education.
- If the cost of acquiring foreign currency increases, it could lead to higher expenses for individuals paying for their school fees in foreign currency, potentially affecting their purchasing power.
It is important for individuals to closely monitor the foreign exchange market and stay informed about any changes or updates from the CBN regarding operational changes.
They should also consider seeking guidance from their banks or authorized dealers to understand the implications for their specific travel or educational expenses.
Pls I would like to know if this policy will affect items like rice and the other 43 items the CBN restricted Forex for their importing
Affected whole lot of businesses