• Wednesday, February 21, 2024
businessday logo


Banks lure retail customers with cheap dollar sales

retail customers (1)

Emmanuel Obinna was surprised when his bank sent an email offering forex at a lower competitive rate.

“The bank even sent me a text informing me that I can walk into any of their branches nationwide to procure forex for the purpose of school fees, medical bills, personal and business travel allowances,” Obinna, a 45-year-old parent, told BusinessDay.

BusinessDay saw such mails sent by lenders including Access Bank, Stanbic IBTC, Standard Chartered, among others, urging clients to access cheap FX with ease.

Following the Central Bank of Nigeria’s direct funding for commercial banks in the country to meet the needs of Nigerians for personal, business travel, medical needs, and school fees, lenders, in a bid to woo customers and generate higher revenues, have upped their game in providing forex to clients at a lower price.

The policy action by the apex bank is targeted at easing the difficulties encountered by Nigerians in obtaining funds for foreign exchange transactions.

Since the announcement of the policy, the apex bank has maintained a regular supply of dollars at both the interbank and parallel FX markets. Also, heavy sales have been directed to the retail end of the market, specifically for invisibles such as personal travel allowances and business travel allowances (PTA and BTA).

Gabriel Ilori, a banker, said banks are sending emails and texts to customers as part of their effort to boost their profitability and also position them to get more FX allocation from the apex bank.

“Ever imagined the profits recorded by banks at year end? A lot of work goes into it,” Ilori said.

“The commission, when translated in naira terms, is really profitable,” he added.

Omotola Abimbola, fixed income analyst at Chapel Hill Denham, attributed the development to the robust excess liquidity in the system due to CBN’s intervention.

He believes that over a short time, the level of liquidity would be sustained by the CBN buoyed by supportive oil prices as well as foreign portfolio inflows into the fx market.

Abimbola said for the CBN to ensure that the parallel market does not skyrocket, the apex bank will continue to supply the small retail demand for FX such as (PTA & BTA) which is not as big as the wholesale auction.

“If they are not supplied, they will go to the parallel market and speculation would start, hence to avoid speculative pressures, they supply the market with liquidity,” he said.

Nnamdi Olisaeloka, fixed income analyst at Zedcrest Capital, said the supply was part of CBN’s secondary market intervention with special foreign exchange intervention and it conducts this intervention twice a month on Fridays.

Banks are required to submit their retail customers’ invoice. The CBN sells to them at $357 and they make a gain of $1 on this transaction.

Olisaeloka said the apex bank would continue to make this intervention but it would be segmented as only selected people would be able to access this intervention. He added that questions relating to what purpose must be answered before customers have access to the intervention.

Godwin Emefiele, CBN governor, while outlining his policy thrust for his second five-year term recently, said the apex bank would continue to operate a managed float exchange rate regime in order to reduce the impact which continuous volatility in the exchange rate could have on the economy.

According to the CBN’s guideline, the maximum volume of BTA approved for sale per customer is $5,000 quarterly, while a PTA customer gets $4,000.

“Banks are hereby directed to process and meet the demand for Personal Travel Allowances and Business Travel Allowances customers within 24 hours of such applications. They are to equally process and meet the demands for school fees (including allowances) and medical bills within 48 hours of such applications,” the CBN circular said.