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Exchange rate: Different rates for different banks...

                                                                                                                                                                                                                   

Although the Central Bank of Nigeria (CBN) stipulates that banks should sell forex for eligible persons who have legitimate request based on the official and interbank exchange rate, investigation shows that majority of the deposit money banks sell forex at arbitrary rates outside the officially approved rate, reports Bukola Aroloye

A huge industry has been built around the sale of hard currencies, especially the greenback (dollars). Of course, the forex dealers in the parallel market have always been getting a kill anytime the naira falls, as they are most certain to exchange the dollar higher for a weaker naira.

But thankfully, Central Bank of Nigeria (CBN) which is the apex regulatory body for banks has always risen to the occasion anytime it feels the value of the local currency is being undermined through different policies such as reviewing the exchange rate.

Only recently, the CBN banned commercial lenders from re-selling central bank dollars among themselves, which was an attempt to curb speculation on the naira.

Besides, the apex bank had barred 41 items from access to foreign exchange. It had directed that as from August 1, all foreign exchange transactions in any Bureau de Change must have the BVN of applicants as foreigners were said to have invaded the nation’s foreign exchange market.

Conscious of its mandate to strengthen the local currency, the apex bank had in a circular released signed by the Director of Trade and Exchange, CBN, Olakanmi Gbadamosi, “The Central Bank of Nigeria has considered the recent statements by deposit money banks concerning the large volume of foreign currencies in their vaults and the decision to stop accepting foreign currency cash deposits into customers’ domiciliary accounts as a welcome development.

“Therefore, in its continued efforts to stop illicit financial flows in the Nigerian banking system which aligns with the anti-money laundering stance of the federal government, the CBN hereby prohibits from the date of this circular the acceptance of foreign currency cash deposits by DMBs.

“For foreign currency cash lodgements made prior to the date of this circular, the account holder has the option to either withdraw his or her foreign currency cash or the Naira equivalent. For the avoidance of doubt, only wire transfers to and from Domiciliary Accounts are henceforth permissible.

“The CBN advises individuals that wish to source foreign currency for eligible and legitimate purposes such as BTA, PTA medical, mortgage, school fees, goods etc. to do so through recognised channels with the use of Form ‘A’ for “invisible” and Form ‘M’ for ‘visible’ transactions. By this circular, those who deposited foreign currencies into their accounts before the directive will now have to withdraw the cash as they are not going to be allowed to transfer the funds.”

The fire this time

The apex bank in line with its mandate also place limitation on spending. In the new arrangement, all ATMs that were hitherto enabled for domestic and foreign transactions have been restructured to limit naira cash withdrawal at ATMs to N60,000 per day while foreign currency is $300 per day. Hitherto, the domestic withdrawal limit was N150,000 per day.

The new arrangement has separated traditional ATM from MasterCard credit card where the former has now been deactivated and can no longer be used for transactions abroad. Hitherto, a single ATM card serves for transactions for both domestic and abroad.

Also, the restructured cards now have spending limits on POS/eCommerce (online shopping) pegged at $300 (about N60,000) per day. Before this, the limit was N2 million per day.

In the new arrangement, a bank customer with multiple debit cards (ATM cards), only the one linked to the primary transactional account will be enabled for use abroad. Hitherto, such customers could transact with any of the cards that is funded and changer high than the official rate.

The fire this time

It is however instructive to note that most money deposit banks have also join the league of money speculators.

Investigation by The Nation shows that the official exchange rate is N199 but at the black market, it is N209/210.

The Nation investigation showed that many banks don’t use the official rate given by CBN.

Some of the banks officials who spoke with our correspondent while admitting that did not denied it but don’t want their name to be mention.

GTbank, N225 to dollar, via debit card transition, UBA N210, Fidelity Bank N220, Skye Bank, 210 FCMB 210, why the official rate is 199.25 as at today.

A banker who spoke with The Nation explained that, if you deposit N1million with any bank in Nigeria today saying 10% can only trade with N390 thousand the remaining N610 is sterilised by government hence cost of borrowing will always be high. At the moment MPC is at 13%. How much is treasury bills today? These are the barometers for you to understand average cost of borrowing as a business man.

For instance, Standard Chartered Bank has asked its customers to request a complementary ATM card for domestic use only so that the original N150,000 daily cash withdrawal limit can be restored and also reactivate POS/online purchase limit of N2 million per day.

Meanwhile a banker in one of this new generation said that, why most of the Nigerian banks charge more than the official rate is that since the apex bank has give them directive to source for foreign exchange outside CBN, it is not possible for us to give it at the official rate for transaction, he also accused CBN of devalue the Naira.

While Zenith allows online transactions the GT Bank chose not to. As one banker confessed, while in the past banking cards linked to naira accounts enjoyed the official exchange rate when used abroad, banks are now using the parallel market rates, removing any previous incentive to adhere to the cashless policy.

In a CBN circular of July discussing limits and controls on corporate and individual naira denominated cards being used abroad, one of the instructions was for banks to inform customers “the banking industry has instituted a tracking system on the use of naira denominated cards”. If this is possible why put limits on the use of anyone’s money? Set certain triggers for amount and frequency and investigate those flagged.

An entrepreneur who wanted to pay $2000 to a software developer outside the country, was informed by his bank that he would have to fill out a form and get CBN approval for an exemption to make the payment.

Apart from the time-is-money cost that this process entails, this surely is an inefficient use of CBN’s time and resources.

The news about the stash of dollars found in Akwa Ibom State House recently indicates that in the long term, the CBN’s current policy is futile. Those who have access to the type of money that keeps Nigeria at the top of the table for illicit financial flows ($15.7b annually) do not need the banks to keep their dollars safe – they have the state security to do that for them. Two, despite the installation of a special task force at the international airports to harass travellers about how much foreign exchange they have on them, those with access to the type of money which needs to be tracked, either travel on private jets thereby skipping this process or are social and political untouchables who will be waived through by the same members of this task force as has been recently observed and reported. Finally, if part of this current regime of restrictions is to address the high levels of corruption by federal and government officials in the successive administrations, then what happens to the money already out of the country, safely in foreign banks and easily accessible with Barclays or CitiBank cards? If these people have no intention of bringing this money back into Nigeria how does the CBN intend to track their transactions?

The bank also required their customers to apply for a foreign currency denominated ATM linked to domiciliary account which would be enabled with no daily or annual international transaction limits.

Earlier, Guaranty Trust Bank Plc had informed its customers of its decision to reduce the daily international spending limit on their Naira MasterCard to $300.

In a communication to the customers, the bank explained: “In view of the increased difficulty in sourcing foreign currency to settle international transactions on Naira MasterCards, we have reduced the daily international spending limit on your Naira MasterCard to $300.This means that you can only spend up to $300 daily when using your GTBank Naira MasterCard for international payments via POS and online.

“You will, however, continue to have the option of paying for medical bills, school fees, mortgages and credit cards using Form A, as these are eligible transactions for foreign currency. Simply visit any GTBank branch to complete a Form A along with the required documents to make these payments.”

A statement from the CBN added that already all the legitimate demands for such transactions through recognised channels have so far been fully met by CBN.

The statement stated: “The CBN hereby directs all authorised dealers in foreign exchange in Nigeria to henceforth treat as top priority all legitimate demand for foreign exchange for eligible transactions.

“The CBN once again advises individuals that wish to source foreign currency for such eligible transactions to approach their banks with their legitimate demand as the CBN has made adequate provisions of foreign currency for all such legitimate and eligible purposes.”

According to Tolu Ajayi a business man told The Nation is expresses with one of the new generation bank, “when I call their customer care line they told me it is N225 and as at that time it was N210, later the rate come back to  N197 still they did not change the rate to the official one. What is going on? What is the official rate? Some banks are even helping to smuggle hard current out of Nigeria ,I was told at the rate between N237 and N240, is Emefiele saying is not aware? Are Nigeria banks now working for the politicians who drilled holes into our treasury or are they the one working for Mallams? Were all quite while this taking place or am I missing something.”

An aggrieved customer with one of the old generation bank said: “70% of Nigeria banks don’t even use the official rate for online transaction and this is a way to defraud customers especially those who use the money to pay school fees, those who buy goods from outside the country were affected.”