The Central Bank of Nigeria (CBN) has issued a directive to commercial banks, mandating the cessation of cash payments for Personal Travel Allowance (PTA) and Business Travel Allowance (BTA) as part of measures aimed at curbing foreign exchange malpractices.
The decision, conveyed in a memo dated February 14 and signed by the Director of Foreign Exchange and Trade Department, Hassan Mahmud, underscores the apex bank’s commitment to transparency and stability in the foreign exchange market.
“Payment of PTA/BTA by cash is no longer permitted,” the CBN stated in the memo. “Authorised Dealers and the general public are hereby to note and comply accordingly.”
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The memo further elaborated that PTA and BTA transactions must now be conducted exclusively through electronic channels, including debit or credit cards.
“In line with the Bank’s commitment to ensure transparency and stability in the foreign exchange market and avoid foreign exchange malpractices,” the CBN said, “All authorized dealer Banks shall henceforth effect payout of PTA/BTA through electronic channels only, including debit or credit cards.”
This move is intended to prevent foreign exchange malpractices and ensure accountability in forex transactions.
The decision comes amidst a concerning depreciation of the naira against major international currencies, particularly the US dollar. Reports from AbokiFX indicate that the naira has plummeted to N1,600 against the dollar on Thursday. Despite efforts by the CBN to stabilize the currency, the freefall of the naira has persisted, prompting the need for decisive measures to address the situation.
The currency’s decline has been attributed to various factors, including global inflationary pressures and domestic economic challenges. Efforts by the CBN to manage the naira’s value have faced significant hurdles.
In its recent move, the CBN has also announced significant revisions to the allowable deviation limits for the Price Verification System (PVS), a mechanism utilized to monitor the pricing of exports and imports. The adjustments, outlined in a circular signed by Dr. Hassan Mahmud, Director of the Trade and Exchange Department, aim to safeguard the economy from price manipulation activities that could exacerbate the foreign exchange crisis.
Previously, the PVS flagged any declared prices of import items that exceeded global average prices by more than 2.5%. However, in light of persistent global inflation, the CBN has expanded the deviation limits for both exports and imports. Effective immediately, the new regulation permits a deviation of up to -15% and +15% from the global average prices for exports and imports, respectively.
The circular reads: “Following the implementation of the Price Verification System (PVS) to curb over-invoicing of imports and under-invoicing of exports, the CBN in a circular referenced TED/FEM/FPO/PUB/01/001 stated that declared prices of import items that are more than 2.5 percent above the global average prices of the referenced item will be queried.
“However, due to global inflation and other related challenges, the CBN has reviewed the allowable limit of price deviation for exports and imports to -15% and +15% of the global average prices, respectively.
“Authorized Dealer Banks and the general public are hereby advised to note and comply accordingly.”
This adjustment represents a significant increase in the allowable limit for price verification and is intended to provide more flexibility in the face of fluctuating global prices while preventing the exploitation of the system.
The CBN’s decision to recalibrate the PVS aligns with its broader objective of promoting transparency and accountability in Nigeria’s banking and trade sectors.
The recent rollout of the PVS portal, coupled with the mandatory requirement for Price Verification Reports in Form M applications, underscores the central bank’s commitment to combating illicit financial practices and ensuring the efficient functioning of the economy.
By implementing these measures, the CBN aims to strike a balance between maintaining stringent controls over foreign exchange transactions and facilitating the smooth operation of international trade amidst global economic uncertainties. This initiative reflects the government’s broader efforts to stabilize the economy, protect the value of the naira, and promote sustainable growth in the financial sector.