Banks Experiment With FX Sale Templates And Implement New Operating Procedures
To alleviate foreign exchange demand pressure, deposit money banks (DMBs) are modifying existing services, internal processes, and operational guidelines.
This is due to rising demand and dwindling supply of dollars in various market segments. The naira fell against the dollar late yesterday afternoon, reaching an all-time high (ATH) of N718.4 on the peer-to-peer (P2P) platform. It traded for around N715/$ earlier in the day, a band that had been in effect for days, but lost the peg around midday.
In the last few days, P2P exchange rates have been extremely volatile, with prices changing almost every second. Trading platforms are also witnessing the speculative tendencies that have defined offline black market trading.
The naira has also weakened significantly in the last week on the parallel market as the summer demand surge continues. Currency dealers, most of whom had run out of supplies, were offering an average of N708 per dollar as of yesterday.
In the main time, bank selling rates remain around N435/$. The spread between the bank and parallel market rates is approximately N275 per dollar, or 63 percent. The market last saw such a wide differential in the 1990s, during the military regimes.
To deal with the increased pressure, banks have tweaked their existing rules and service offerings. Only yesterday, an old generation bank sent an email prohibiting the use of various types of naira debit/credit cards for international transactions.
“Due to current market realities on foreign exchange, you will no longer be able to use the Naira MasterCard, Naira Credit Card, our Virtual card and Visa Prepaid Naira card for international transactions. This will take effect on 30 September 2022. Please use your Visa Debit Multicurrency Card, Visa Prepaid (USD) Card and Visa Gold Credit Card to continue transacting abroad with limits of up to $10,000,” the email seen by The Guardian stated.
The most recent message came just a week after the company stopped paying personal/business travel allowance (B/PTA) in cash.
“The full personal travel allowance (PTA) and business travel allowance (BTA) of $4,000 and $5,000 respectively will now be disbursed into your 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.”
Another bank has increased the processing time for FX requests to a minimum of six weeks, claiming that this will allow them to review applications in accordance with regulatory requirements.
“To serve you better, please be informed that we now require six to eight weeks to process your FX needs for international school fees, upkeep and medical payments. This will enable us to review your requests in line with regulatory requirements and ensure that we are able to source for FX to fulfill them,” one of the affected banks notified its customers.
As an increasing number of users fail to receive even after their requests have been approved, some banks have emailed their customers to inform them that disbursement would be based solely on availability.