Explainer: Can travel allowance on debit card curb FX pressure
Nigerian banks are now disbursing travel allowance through travel debit cards, a development expected to minimise abuse of foreign exchange and help to conserve external reserves, according to analysts in the financial services sector.
The travel allowances include Business Travel Allowance (BTA), Personal Travel Allowance (PTA), and school fees.
Some Nigerian travellers abuse the travel allowance by trading unutilised PTA/BTA at the parallel market.
Consequently, some Nigerian deposit money banks have created debit cards for accessing foreign exchange for legitimate needs by the end-users.
Access Bank, GTBank and First Bank of Nigeria are among the banks that have introduced travel debit cards for easy access to foreign exchange for legitimate needs.
The benefits of the Access Travel Debit Card include instant issuance for PTA/BTA requests, easy access to international transactions via PoS, ATM and web.
The card is valid for three years and can be used for current and subsequent PTA/BTA requests within its validity.
On August 12, 2021, the Central Bank of Nigeria (CBN) and the Bankers’ Committee announced plans to digitise dollar sales for legitimate needs through creating an App.
“Personal Travel Allowance and Business Travel Allowance will now be disbursed into your FirstBank Travel Card ($3,500) and via cash ($500). All applications will still be in line with Regulatory Requirements,” First Bank of Nigeria said in a notice to its customers.
“Kindly ensure that all PTA/BTA applications are submitted 14 days (minimum) before your proposed travel date, while a minimum of 30 days is required for school fees, upkeep and others,” it added.
However, one of the questions some Nigerians and business operators that have been affected by the continued exchange rate crisis are asking is: can travel allowance on debit cards curb FX pressure?
“This will not address the pressure but only serve as a control to monitor disbursement and usage,” said Ayodeji Ebo, managing director/chief business officer at Optimus by Afrinvest.
He said to reduce pressure, supply needs to increase significantly but the CBN is constrained due to the declining FX inflow from oil.
Taiwo Oyedele, head of tax and corporate advisory services at PwC, described the introduction of travel debit cards for the disbursement of PTA/BTA as a welcome development that could serve as a form of control to stem the abuse by those who are exploiting the system.
“I expect that an artificial intelligence mechanism will be built into the cards to ensure that travellers utilise their PTA/BTA in a manner that is consistent with their applications such as their travel destination,” he said.
According to him, the spending pattern can be analysed using big data to inform necessary policy changes in addition to enforcing the policy of returning unspent PTA/BTA to the CBN which has so far been difficult to implement.
“Overall this should have a positive impact in preserving our external reserve and improve the availability of forex for legitimate demands in the official windows. It may however result in further depreciation of the Naira in the parallel market in the short term as some of these illegal supply sources are cut off,” Oyedele said.
A traveller who has used the travel credit card shared his experience: “The card was loaded with dollars. It can lead to loss of money like in my case where the trip was to South Africa and their currency is rand. When I withdrew from the ATM, it was converted at a certain rate and that was where I started losing money.
“They impose other charges for making that withdrawal too. And there are also limits to how much you can get at a time daily, so the more transactions you carry out, the more charges you pay and the more money you lose.
“If you have anything unspent and decide to convert back to dollars, you lose again when the conversion is done. The card itself is expensive… They don’t tell you they will deduct the money for it until later, and that costs 10 or 13$.”
Another traveller who could not access FX said, “I applied for PTA and duly completed the Form A with required documents. I didn’t receive it before I travelled to Bangkok; approaching my bank to engage them, I was told I applied late and many people were still in line.”