Banks struggle to meet demand for PTA, BTA ahead of impending Naira crash

Nigeria’s lingering foreign exchange (FX) scarcity is currently keeping  Deposit Money Banks (DMBs) resources grossly overstretched as they struggle to meet the huge FX demand from their customers.

The current development is taking a heavy toll on foreign tuition, businesses, and leaving several manufacturers frustrated as more pressure retuened to the parallel market.

Daily Sun learnt that many students (seeking admission in the United Kingdom, Scotland and European nations ) reportedly are now rushing to purchas FX from dealers ahead of the resumption of school activities and clearing of their goods at foreign ports.

The Central Bank of Nigeria (CBN) in its efforts to manage the forex market, had assured that PTAs and other invisible transactions would continue to be accessible through banks at the prevailing I&E window rate.

However, a recent survey showed that several commercial banks in Lagos are struggling to meet  demand for forex, with some  in many cases, simply not having nothing to sell.

Daily Sun had reported that Nigerian banks informed their customers that they would only be able to access Personal Travel Allowance (PTA) and Business Travel Allowance (BTA) once in two quarters.

Before this new development, banks had been granting approval to travelers who applied once every quarter. The situation according to analysts is exacerbated by the massive disparity in official and black market values, which has now widened to N200/$1 in a matter of months since the unification of the exchange rates markets was announced.

The exchange rate disparity was a major trigger for the introduction of the revised foreign exchange market forcing authorities to ease foreign exchange controls in mid-June to simplify its monetary regime.

However, this move appears to have led to heightened volatility in the black market, driven by strong demand from manufacturers, importers, students, and travelers

Daily Sun investigations revealed that to meet their obligations, they regularly convert a significant portion of their income into dollars, further contributing to the limited supply available for all. As a result, the depreciation of the naira persists, and the outlook for forex volatility remains uncertain.

During the last monetary policy committee meeting of the Central Bank, Acting Governor Folashodun Shonubi acknowledged that the ongoing forex volatility is primarily attributed to the limited supply of foreign currency. 

He expressed optimism that once the supply issues are addressed, the volatility is likely to reduce.

“Some of the volatility you have seen over the period has been driven by that same fact that the market needs to find its level and also the reality that there is a pent up demand which current supply may not be sufficient for and as we ease and satisfy the pent up demand we will begin to see more efficient markets that runs.

So we expect that over time, sooner rather than later. The volatility will normalize. The role of the central bank is to intervene and keep the market at a fairly stable level. We have our views as to what that level is and as the market continues to oscillate around that level, if there is a need for us to intervene either by buying or selling, that is the role of the Central bank”, Shonubi said.

Several analysts who spoke to Daily Sun via emails shared their concerns that forex volatility may persist as more young Nigerians leave the country in search of better opportunities, a phenomenon colloquially known as “japa” and more manufacturers will seek for FX.

The Managing Director, APT Securities, Mallam Kurfi Garba, said that the current development is spreading panic through the business community and urged the Tinubu-led administration to act fast as to avoid losing control of the Naira.

“The goal was to facilitate a realistic rate and remove the wide arbitrage gap created by the official and parallel market rate. Unfortunately, it has not been met. Furthermore, we are yet to have an official cabinet or strong economic management team coupled with the rising inflation, the fear is that this government might lose control and this could mean harm for the economy.

This means that the present government needs an economic team urgently. There has to be closer collaboration with the appropriate agencies because the shortage of the dollar is leaving the supply in the hands of the BDCs and with their current price, a short term strategy is needed to boost the Naira”, Garba explained ADAPTED FROM THE SUN