Foreign Exchange

The Naira may continue to maintain its instability in the foreign exchange market in 2022 as one US dollar was sold at NGN562/$1 by some Bureau De Change operators Saturday, January 1, 2022

The BDCs bought $1 at NGN555 at Ikeja and other parts of Lagos, Nigeria’s commercial city. It’s NGN565 and NGN550.

Before 2021 ended, demand for forex was higher than supply at the parallel market, thereby pushing it to NGN570/$1 on December 20. It traded at NGN565/$1 in the earlier week.

The margin may be considered again for the troubled Nigerian currency, it’s however not significant considering how NGN fell heavily since the removal of BDCs from the forex value chain by Nigeria’s apex bank in July 2021.

The best performance Naira pulled was NGN525/$1 on November 12, 2021, while the worst was NGN575 since the new CBN forex policy

Blackmarket rate is unofficial

The black market rate or street market is characterised by the power negotiations between the seller and buyer.

The Central Bank of Nigeria (CBN) has consistently maintained that the parallel market should not be used to determine Nigeria’s foreign exchange rate, while some financial analysts stated that the CBN has been over-valuing Naira as the official price doesn’t align with the rate Nigerians get it at the banks.

For instance, banks do not have a unified price, thereby making the official market rate questionable or showing a slack in the efficiency of the regulator to check the excesses of the banks.

P2P Exchange Rate read more

There are important documents applicants need to submit to the Central Bank of Nigeria (CBN) for the processing of fees for foreign services, such payment is known as invisible transactions in international trade.

This isn’t limited to Nigeria. It is a general practice around the world. Foreign invisible transactions are prevalent in Nigeria because of the craze for foreign services (and goods).

Even the government that should take the lead in patronising indigenous services prefer importation of services from UAE, USA, Germany, Italy, and China among others.

The billions of dollars in invisible transactions that have been spent through estacodes for politicians are unimaginable.

That said, political spending isn’t the only invisible transaction that take place in Nigeria. Private company and incorporation do send members of their staff to foreign seminars, workshops and training, payment for their hotel lodge constitute invisible transactions.

And there are approved documents to access the official foreign exchange rate for such foreign transactions, they constitute invisible trade, trade that do not involve exchange of physical objects.

What are the documents for invisible transactions?

Apart from the completion of Form A which is required for all the services outlined in this guide, the kind of services determines the documents applicants would attach to their applications.

This means that the document to attach to a foreign seminar is completely different from a postgraduate studies invisible transaction application at the bank.

Here is the complete required documents for all invisible transactions in Nigeria.

NOTE: Application to make payment for all these services can be done on the Trade Monitoring System designed by Nigeria’s apex bank (which some people prefer to call Single Window payment platform)

Correspondence Courses:

There are several digital online courses that involve registration, membership subscription and examination fee for individuals and corporate bodies. Important documents for application for forex for these courses are:

• Duly completed form A
• Evidence of membership and/or enrolment
• Demand Note/Invoice
• Your Bank Verification Number (BVN)
• Internal Passport (Nigerian)

BTA:

We’ve discussed in our previous guides the requirements to apply for Business Travel Allowance. If it’s your first application, here are the documents for invisible transactions for BTA:

• Duly completed e-Form A on TRMS portal
• Letter of invitation from the overseas business partner
• Certificate of the business registration/incorporation
• Valid International Passport and Visa
• Letter of request from the corporate body stating the purpose of visit
• Return Ticket

=&4=&: Applicants are entitled to US$5,000 per quarter

Freight Payment:

This payment is common among exporters for transportation invoices

• Completed Form A
• Fill form NXP/NCX on TRMS
• Freight Invoice
• Bill of Lading
• Confirmation of reasonableness BY NSC

PTA:

For Personal Travel Allowance, the required documents you need to upload on the TRMS are:

• Duly completed Form A (which is online)
• Valid International Passport and Visa
• Return Ticket

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The Central Bank of Nigeria (CBN) should adopt a flexible exchange rate that will allow a pricing mechanism strategy that reflects the demand and supply fundamentals in the foreign exchange market.

The Centre for the Promotion of Private Enterprise (CPPE), made the call in its 2021 review of the various policies that were introduced by the CBN as the year wind down.

One of such policies was the removal of the Bureau De Change (BDC) operators from the foreign exchange value chain. The apex bank diverted the weekly forex for BDCs to financial institutions with forex licence, the policy was filled with mixed reactions.

While some hailed the CBN policy, a few others said it was a move by the Godwin Emefiele-led management to fix price, some financial analysts said CBN was manipulating the forex market by using the official exchange rate that doesn’t reflect what is obtainable in the parallel market.

On the need for a flexible exchange rate, the economists at the CPPE said its advice shouldn’t be misconstrued as a “devaluation proposition” but a model that is sustainable, predictable and transparent.

The body of economic experts stated that the flexible exchange policy regime would reduce uncertainty and inspire the confidence of investors.

6 Benefits of Flexible Exchange Rate Market

1. It increases investors’ confidence
2. It enhances liquidity in the forex market
3. It ensures a more transparent model for forex allocation
4. It minimises discretion and arbitrage in the foreign exchange allocation mechanism.
5. It dynamic and able to cope with changing demand and supply conditions in the forex market.
6. It liberalises inflows from export proceeds, diaspora remittances, multinational companies, donor agencies, diplomatic missions among others.

Review 40 Items That Can’t Access Forex

Some time ago, the CBN listed some items that can’t access foreign exchange in a move to boost local production of such items and in November 2021, launched a “100 for 100 Policy on Production and Productivity (PPP) to boost local manufacturing.

But the Centre for the Promotion of Private Enterprise, said the apex bank should have a rethink over the policy in order to save the Nigerian currency which has lost value since the CBN started rolling out some of its forex policies.

CPPE advised that if CBN needs to improve dollar liquidity to rescue the naira and help industries to grow and expand. It stated that the current policy is negatively affecting investors and stakeholders in the manufacturing sectors.

It states in a statement, “Some of the products on this list are intermediate products for some manufacturing firms which have negatively impacted some manufacturers. It would be advisable for the CBN to have a robust engagement with the stakeholders to review this list in the New Year.”
CBN CRR Policy Preventing Banks from Playing Financial I=&7=&

Payment for services like website design, security consultancy, hotel lodge, medical bills, education fees, and business consultancy are some services that constitute invisible trade; because they are services that do not require the transfer of physical objects.

Simplifying Invisible Trade

The purchase of the Lamborghini Essenza SCV12 is a visible trade. But the buyer wants more on maintenance and he seeks consultancy from an expert which he also pays for, the consultancy is an invisible trade.

For instance, in August 2020, the Central Bank of Nigeria (CBN) hinted that it engaged the services of a Barbados -based Fintech coy Bitt Inc, to design its digital currency eNaira. The service between Bitt Inc and CBN is known as invisible trade.

There were criticisms form some quarters that why would the Nigeria’s apex bank go all the way to Barbados to seek the services of foreign company when there were more than enough blockchain and fintech firms in Nigeria that could handle the project. But the CBN hinged its decision on Bitt’s implementation experience, efficiency, and technological competence among others.

What is Invisible Trade?

In international trade, invisible trade refers to transactions in foreign exchange in services that do not involve tangible goods or physical objects.

In Nigeria, estacode by politicians and senior civil servants, payment of foreign school fees by the privileged few, payment in forex of medical fees fall under invisible trade.

As such, Nigeria’s apex keeps a close eye on its invisible trade because it’s useful in calculating the total balance of trade and to keep a close tap on the foreign exchange market.

What Constitute Invisible Transactions In Nigeria

Invisible transactions are payments that require duly completed Form A which is a regulatory form to be completed by customers on the =&7=&

The Trade Monitoring System or TRMS is a digital platform designed by the Central Bank of Nigeria (CBN) to enable students, exporters, anyone seeking medical attention in the overseas countries to apply for foreign exchange (US dollar, GBP, and Euro) through trade forms like NXP, NCX, and form A.

In essence, the TRMS is aimed at simplifying data exchange between stakeholders in the trade chain. The beauty of the platform is that it’s all-encompassing as applications for foreign exchange for both visible and invisible trades can be submitted within a few seconds.

What’s new about Trade Monitoring System?

Unlike the conventional and the old method of application for Personal Travel Allowance (PTA), Business Travel Allowance (BTA), foreign school fees, foreign medicals where you had to fill out forms and forced to visit the branch of your preferred bank, the Trade Monitoring System has brought everything online. And in one place.

This means you don’t need to visit the bank again, right on your smartphone or device, you can conveniently submit applications for forex needs.

With the TRMS, the apex bank can monitor applications for forex real-time and track applicants with their BVN or TIN. We’ll talk more about the benefits of the Trade Monitoring System and some of its challenges.

According to a statement signed by CBN’s Director of Trade and Exchange Department, Dr S.O. Nnaji:
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There are several questions revolving around the official exchange rate for PTA, BTA, Medical trips, and for students who need to access foreign exchange to settle foreign school fees.
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Nigeria’s foreign exchange market continues its poor performance as one British pound sterling was sold by Bureau De Change operators for N745//£1 Wednesday, December 15, 2021, in Lagos State, Nigeria’ commercial capital.

In the past, naira gained at FX market during Yuletide considering the inflow of forex to the country courtesy of Nigerians in the diaspora who either come home or send funds to their families at home

When there is a surplus, NGN will have an advantage over dollars, Pounds Sterling, Euro and other foreign currencies. Stiff policy and insecurity in Nigeria may be attributed to the latest trend.

Dollars to Naira Blackmarket Rate

Also, the dollar to naira exchange rate showed a similar downward performance as $1 was sold by BDCs for NGN570 at the time of filing this report.

In fact, some of the BDCs were ready to pay NGN573 for higher volume. But they buy from a holder at the rate of NGN565 or NGN567, depending on the volume. This can be attributed to a shortage of supply as against demand. When demand is higher than supply, the price goes up.

Naira remained unstable since the decision of the Central Bank of Nigeria (CBN) on July 27, 2021, to remove BDC operators from the forex value chain.

Importer & Exporter Exchange Rate read more

Naira crashed to NGN575/$1 at the close of business at the parallel market on Friday, December 10, 2021, in Lagos, Nigeria’s commercial city. read more

On November 10, 2021, the governor of the Central Bank of Nigeria (CBN) Godwin Emefiele at the France-Nigeria Security and Economic Summit, in Paris, France, expressed optimism that by the middle of 2022, Nigeria’s foreign reserves will surpass the $42 billion thresholds.

It’s been turbulent for Nigeria’s economy and its foreign exchange market in recent times, but Nigeria’s apex bank boss had consistently boasted that his team is in control and would stabilise the troubled Forex market.

Severally, financial and global economy analysts have accused the Emefiele-led CBN management of defending Naira with Nigeria’s foreign reserves, a policy they said would have consequences on the economy and the naira.

For instance, Leo Ukpong, a Professor of Financial Economics once accused CBN of manipulating the foreign exchange, stating that the gap between the official rate and the parallel rate should worry everyone who has been following Nigeria’s FX market closely.

The world-renowned economist isn’t the first to criticise CBN for defending naira with foreign reserves. World Bank had also cautioned Nigeria’s apex bank, advising it to stop defending the troubled Nigerian currency with its external reserves.

What Are Nigeria’s Foreign Reserves?

Nigeria’s foreign reserves stood at $34.80 billion in the first quarter of 2021, it declined to $33.3 billion in the second quarter, it then rose to $36.7 billion in the third quarter. It is predicted to rise to about $41.82 at the end of 2021, according to data from the National Bureau of Statistics (NBS).

Nigeria’s foreign reserves are assets held on reserve by the Central Bank of Nigeria (CBN) which are used to back liabilities and influence monetary policy.

The external reserves include foreign banknotes, deposits, bonds, treasury bills and other foreign government securities.

Foreign reserves simplified

Foreign reserves or external reserves are like a salary earner who saves part of his monthly salary for rainy days. In case of emergencies, he goes there to withdraw. On the other hand, another salary earner who has no savings is most likely going to borrow when exigency arises.
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The exchange rate of the US dollar to Naira on Monday, December 6, 2021, shows the value of the Nigerian currency isn’t showing any sign of improvement, most especially at the black market (parallel market).

Black market rate

As of Monday, December 6, 2021, 11:45 AM, $1 was selling at NGN565 (buy) and NGN560/$1 (sell), according to one of the Bureau De Change (BDC) agents t Allen, Ikeja, Lagos. It’s NGN560-NGN555 last week.

The exchange rate depends largely on the volume of your trade and your power of negotiation as you can be “cheated” if you failed to compare prices before buying or making sales.

In Osogbo, Osun State capital, it’s NGN550/$1 (buy) and NGN540 for buy, depending on the volume of trade.

Position of CBN read more

For close to three decades, Nigeria’s economy has depended largely on the importation of finished products, even some indigenous manufacturing companies import raw materials.

To put a stop to an importation economy, the Central Bank of Nigeria (CBN) on October 25, 2021, launched “100 for 100” Policy on Production and Productivity (PPP).

The laudable policy is going to reduce demand for foreign currencies, it will not only force the US dollar exchange rate to crash in Nigeria, it will also effect a positive change in the value of Naira and gradually eliminate the implications of naira depreciation on the economy.

The 100 for 100 policy initiative coincides with the official launch of the eNaira, the first Central Bank Digital Currency (CBDC) in Africa.

Meaning of 100 For 100 Policy

100 for 100 means one hundred companies will be selected within the application time frame every one hundred days. The successful 100 companies would receive a maximum of NGN5,000,000,000 from the apex bank to boost local production and manufacturing.

For us at InfomediaNG Business Solutions, the PPP is the best in recent times aimed at, not just boosting local production and reducing importation, but the transparent financial support and the single-digit credit facility the apex bank would be providing for local manufacturing companies in Nigeria.

CBN is saying it’s ready to give a local company NGN5 billion to source raw materials locally, show evidence of exports of your finished products, show evidence of a reduction in the importation of materials, and capacity to create jobs for the millions of youths.

5 Long-Term Impacts of 100 for 100 Policy on Forex

Policy on Production and Productivity is one of the perfect long-term policies investment and financial analysts, and economists had been clamouring to boost production and productivity as a tool to transform and catalyse the productive base of Nigeria’s economy.

Here is how the 100 for 100 policy will make the naira regains its value, which will lead to the crash of US dollar exchange rate in the FX market:

Percentage Increase In Export Volume

Sufficient local production, if effectively sustained, will translate to exports of such products to other countries around the world.

For instance, Malaysia’s palm oil revenue was more than what Nigeria got from oil revenue as of 2006. Unbelievably, Malaysia got palm oil seedlings from Nigeria in the 1960s.

Apart from meeting local consumption of palm oil in Malaysia, it’s able to meet international demand. This is the direction the =&4=&

The naira continued its appreciable performance against the US dollar on November 12, 2021, at the black market, it closed at NGN525 at the close of business on Friday. read more

The naira is showing an improvement at the exchange market as it gained against the US dollar early morning of Thursday, November 11, 2021

On September 30, USD traded NGN580 while it went for NGN575 on October 6, five days after the Central Bank of Nigeria (CBN) postponed the launch of its digital coin dubbed eNaira which eventually launched on October 25.

Since the launch of eNaira, the first Central Bank Digital Currency (CBDC) in Africa, the fiat currency (naira) has been making a significant gain against foreign currencies at the exchange market. A few days ago, InfomediaNG Business Solutions (IBS) reported how eNaira is effecting change in exchange at the forex market.

Exchange Rate on November 11, 2021 read more

eNaira, Nigeria’s digital coin, seems to be having a good impact on the fiat version of Nigeria’s currency. On Wednesday, November 3, 2021, $1USD was NGN557 as against NGN565/$1 a month ago. read more

In July 2021, the Central Bank of Nigeria (CBN) announced that financial institutions that have foreign exchange licence would be in charge of selling forex to eligible Nigerians to meet their foreign exchange needs.

Technically, it means that Bureau De Change operators would no longer be able to buy FX from the apex bank. Since then, Nigerians who need forex for foreign needs need to apply at the banks, but some applicants revealed that the bureaucracy is annoying.

The question we asked some of those who contacted InfomediaNG Business Solutions is: Why did you choose to stress yourself when you can fund your Dollar Debit Card and spend it in any part of the world?

Domiciliary Debit Card

The need to simplify the process of buying forex in Nigeria came to the fore when Access Bank Plc announced that it launched Dollar Mastercard for Nigerians to have access and spend forex in any part of the world.

But in an actual sense, this is a technology that banks like GTCO and 10 other Nigerian banks already have. We’d tell you the banks in the later part of this guide.

First…

What Is Dollar Debit Card?

A dollar debit card is a debit card that carries out transactions in US Dollars. It operates like the Naira Debit card, the major difference is that it’s denominated in USD or whatever foreign currencies’ transactions it’s designed to perform.

Some banks in Nigeria have Pound Debit Card, which means that the handler of Pound Debit card can easily use it in the UK and other transactions that support the Great Britain Pounds (GBP).

6 Benefits of Dollar Debit Card

Holding and operating a domiciliary card has its a lot of advantages most especially for entrepreneurs whose business depend largely on online shopping and importation; for students who want to settle school fees online etc.

1. You can access your fund 24/7 in any part of the world.
2. It simplifies online shopping
3. It’s faster most especially when you have to use it at ATM terminals and PoS
4. It has a global acceptance
5. You don’t have to worry about currency conversion
6. It is secured because it uses Chip and PIN technology to block unauthorised transactions.

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