Senate urges CBN to release $717.5m trapped airlines funds
Dollar notes


The reduction in the amount of dollars available to customers for Personal Travel Allowance (PTA) and Business Travel Allowance (BTA) by the commercial banks is making life more difficult for travelers and travel stakeholders; findings have shown.

Business Hallmark gathered that the new development is another move by the Central Bank of Nigeria (CBN) to push for stability in the face of lingering forex scarcity in the country.

According to the new directive which took effect immediately, PTA available to customers is now slashed by 50 percent from $4,000 to $2,000 while the BTA is slashed by 60 percent from $5,000 to $2,000.

The banks also extended the processing time for accessing foreign exchange (FX) for international school fees processed through Form A from 48 hours to 120 days, marking a significant shift in the FX policy.

Form A is an application form designed by the Central Bank of Nigeria (CBN) to pay for service transactions (invisible trade) that allow customers to make payments for services such as School fees, Technical fees, Dividends, Airline Tickets, Loans repayment, Judgment debt, Personal Home Remittance, PTA and BTA, among others.

Nigeria, like many other countries, has been grappling with a shortage of foreign exchange due to a decline in revenue from oil, its major export. This has put pressure on the country’s foreign exchange reserves and the value of the local currency.

Checks by our correspondents at the bureau de change (BDC) markets in Lagos indicated that a dollar is sold for N745 on Thursday. At the Murtala Muhammed International Airport (MMIA) in Lagos, it went as high as N750 to a dollar as commercial banks comply with the new directive.

A traveler who spoke with a national daily said, “This means after you wait for weeks, you are only entitled to $2000 and wait for another six months to apply for another $2000. For instance, I am embarking on a trip to Cairo for two weeks. How will I cope with $2000, that is if you have access to that because the best thing is to go to the black markets if you cannot wait.”

A BDC operator, Nasiru Gidado said the BTA or PTA is not even accessible easily, noting that many travellers would have to go through the black market.

“But we are also under pressure as BDC operators. Most people are coming here to buy but the truth is we don’t have dollars. I know the $4000 they used to give is hardly enough. Now that it has been reduced to $2000, how do you want people to cope?” he asked.

Another BDC operator at MMIA who identified himself as Hassan, said “The truth is that CBN itself doesn’t have dollars and the commercial banks are giving out the little they have on a preferential basis. They have those they are prioritizing.

“For instance, CBN has not supplied the BDCs any dollar in the last one year because they don’t have, yet we pay N250, 000 every year as license renewal fee. So, there would be pressure here at the black markets.”

President of the National Association of Nigerian Travel Agencies (NANTA), Mrs. Susan Akporiaye, said the policy would make travel more difficult and expensive.

“This will just make travel more difficult and more expensive because obviously $2000 is not going to do anything. It will make people go and buy at black market because that $2000 will not be enough for anything except somebody who is just going for one official three-day trip.

“Now, you have to go and source for another $2000 outside, which adds to the expenses on travel. That is the downside.”

She said many travelers have been grumbling over the policy but there is nothing the travel agencies can do.

Before now

In September last year, commercial banks mandated travelers in need of dollars – PTA and BTA – to get travel debit cards as they commenced card-based dollar disbursements.

The policy shift, announced by many banks including FirstBank and Access Bank, followed rising cases of abuse by travelers who get forex but fail to use it for trip-related purposes or turnaround to trade the funds at black markets.
It is also a part of the Bankers’ Committee policy to use digital processes to track forex transactions, stop fraudsters from abusing the system, and save scarce forex for the economy.

At one of the bankers’ committee meeting in Lagos the previous year, Group Managing Director, Guaranty Trust Holding Company Plc, Segun Agbaje, said there had been incidents of customers presenting expired passports, invalid flight tickets, or open tickets that are canceled after they acquire the foreign exchange.

He said some bank customers had been also accused of requesting for forex in excess of what they require. Agbaje added that banks do not want “fraudulent transactions taking place” in the guise of forex transactions.

The card-based forex sales to customers are seen by industry experts as a major step to curb round-tripping in the industry and ensure that only genuine forex users get dollars.
In a note to its customers, First Bank had said that PTA and BTA will now be transferred to the FirstBank Travel Card.

In the note titled “Updates on FX Purchase reads:” The bank further indicated that PTA/BTA sales are limited to two quarters per year and that only applicants with approved Form A are eligible for payout.

It said: “The full Personal Travel Allowance (PTA) and Business Travel Allowance (BTA) ($4,000 and $5,000) respectively will now be disbursed into your FirstBank Travel Card.
“All applications will be in line with regulatory requirements. Kindly ensure that all PTA/BTA applications along with the approved Form A are submitted at the branch exactly 14 days before your proposed travel date. Sales are limited to two quarters a year.”

Past interventions

The CBN has tried several interventions to stabilise the local currency in last three years, but has achieved little success. It has devalued the naira three times since the first quarter of 2020, as lower oil income put pressure on the nation’s foreign reserves.

In 2021, the apex bank suspended sales of foreign currency to Bureaux Du Change operators, saying the parallel market had become a conduit for illicit forex flows and graft. Last year, it offered bonus payments to those receiving dollars from abroad.

Dollar scarcity has however persisted as Nigeria earns less from oil, its chief export item. The lack of foreign currency has affected investments with companies and investors finding it difficult to repatriate funds. For instance, the trapped funds belonging to foreign airlines operating in
Nigeria have risen by 12.39 per cent to $743,721,097 in January 2023 from $662m in the corresponding period last year, according to the International Air Transport Association (IATA). The crisis has also piled pressure on the naira, stoking inflation. Headline inflation surged to 21.82 percent in January 2023 compared to that of December 2022 which was 21.34 percent.

Multiple Exchange Rates

Nigeria operates a multiple exchange rates system, a practice that has negative implications for investment. In April 2022, the World Bank Group urged the Nigerian government to rethink its multiple exchange rates policy, in addition to its controversial fuel subsidy regime.

The president of the World Bank Group, David Malpass, said the multiple exchange rate system is “complicated and is not as effective as it would be if there were a single exchange rate.”

“The most useful thing for developing countries is to have a single exchange rate that is market-based, that is stable over long periods of time as that attracts investment and so that would help,” he said.

In 2019, the International Monetary Fund (IMF) warned that the nation must ensure convergence in its exchange rate regime if it desires to stabilize the local currency.
The Senior Resident Representative and Mission Chief for the IMF, Nigeria, Amine Mati, argued that multiple currency practices globally are on the decline and exchange rate unification should be a policy-driven decision that the government must make.

“Multiple exchange rates have different implications across different countries in the world. We have analysed the situation in Sub Saharan Africa and have noticed that each country is able to succeed as a result of the policies that have been put in place to counter challenges.

“The IMF’s policy has been consistent on this issue, such that, we advise for the unification of exchange rates and the Central Bank of Nigeria and Economic Recovery and Growth Plan are already working in this direction to ensure that the country has a unified exchange rate,” the official said.

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