Nigerian banks cut forex payments to foreign travellers

Major Nigerian banks announced new amounts they will be paying as personal travel allowance and business travel allowance to people travelling outside the country, with a major slash that signals a more serious foreign exchange shortage than the markets have shown.

– A key point to note

Multiple banks announced 50% and 60% slash on the amounts they will pay travellers as PTA and BTA. Both categories of payment will not be capped at $2000 as against $4000 and $5000.

– Why this matters

The announcements show the banks do not have enough foreign currencies and suggests Nigeria’s continuing forex shortage and its risk to the economy may be getting worse.

– Learn more

The two allowances are paid to travellers in foreign currencies at official rates and not the significantly more expensive parallel market rates. One dollar exchanged for 460 naira at the official market on Tuesday but traded for 750 naira at the black market.

Banks have rationed foreign currency payments for years as Nigeria faces severe shortage. People travelling abroad for schooling, medical treatment and more are able to receive foreign currencies like dollars and pounds at the official exchange rates.

But banks said limited supply of foreign currencies required the imposition of additional caps on allowances and the time it takes to process applications.

“In view of the limited FX supply in the industry, kindly note the following: Payment of PTA/BTA is subject to a maximum of $2,000 and two quarters in a year, while funds will be disbursed within the week of the trip,” First Bank said in a message to its customers.

The bank said it will continue to pay upkeep allowance at not more than $1,500 per semester and limited to 2 semesters per session, and school fees is subject to a maximum of $7,500 (or its equivalent in other currencies) per semester and limited to 2 semesters per session.

Instead of a few weeks, a minimum of four months is now required to process school fees and upkeep.

Access Bank delivered a similar message to its customers.

“PTA / BTA requests are now processed a maximum of twice annually per applicant to the tune of $2,000 per application where the request is within 14 days of the travel date,” it said.

“International school fees and upkeep requests are processed within 120 days from the date of approval.”