• Monday, March 04, 2024
businessday logo

BusinessDay

Concessionary pilgrim exchange rate cost Nigeria N3.9 billion

http://www.dreamstime.com/stock-photos-bag-money-dollars-image2699363

The economy may be losing a whopping N3.96 billion to the concessionary exchange rate of N160/$ offered by the Federal Government for the sale of Personal Travel Allowance (PTA) to 66,000 pilgrims from all the states of the federation, Federal Capital Territory (FCT) and   the armed forces in this year’s hajj operations, BusinessDay analysis has shown.

This is against the going rate of between N197- N198 to a dollar at the interbank foreign exchange market.

This has been the typical conduct of successive governments, concerning the Christian and Muslim pilgrimages over the years.

The pilgrims are expected to purchase a maximum of $1,000 and minimum of $750, under the Pilgrims Travel Allowance (PTA) in an exercise which has Kaduna with the highest number of pilgrims with 5,682; and Akwa Ibom with the lowest – 65, the Armed Forces, 400 and Hajj commission officials – 978. A total of 12 banks would serve as outlets for the purchase of foreign exchange for this purpose.

The development is coming on the heels of the introduction of charges of between five and ten percent on foreign currency deposits on bank customers. Analysts said at the weekend, that this would fuel sustenance of black market operations.

But, Mu’azu Ibrahim,the Central Bank of Nigeria (CBN) spokesperson, said such black market activity is illegal and any bank caught would be dealt with.

The CBN in a circular presented by Olakunmi Gbadamosi, director, Trade and Exchange department, last week said, “Each pilgrim is entitled to purchase a minimum of $750.00 and maximum of $1,000 as PTA. The Federal Government has approved that intending pilgrims are to be sold the $750.00 at a concessionary exchange rate of N160/$.”

Business Day analysis shows that, with the 66,000 pilgrims going for the maximum of $1000, a total of $66,000,000 forex would be purchased. At the concessionary rate of n160/$,  a total of N10,560,000,000 would leave the economy, while the amount would rise to N14,520,000,000 at the prevailing market rate of  N220/$.

The implication is that the economy would record a deficit of N3, 960,000,000. At the exchange rate of N160/$, it would amount to $24,750,000, while loss or difference of $18,000,000 would be recorded at N220/$.

But some analysts said at the weekend, that at a time that the CBN is fighting to save the local currency which is under pressure, due to dwindling fortunes from oil sales, government should have at least put the exchange rate at the interbank rate of N198/$.

“This calls to question, the continued intervention in religious matters by the government,” says Friday Ameh, energy analyst.

According to another source, who pleaded anonymity, “We were happy when government announced that it would no longer sponsor any delegation on any pilgrimage, but giving a ridiculous concessionary rate of N160/$ raises questions about the intention of the government.”

Responding on charges by banks, Bolade Agbola, executive director, Cashcraft Asset Management said, “The charges would make funds transfer through domiciliary accounts more expensive, so people may have to patronise the official market if available.”

But analysts of a middle tier bank’s market summary for August 8, 2015 said, “ In fulfillment of the CBN’s directive which aligns with the anti-money laundering stance of the Federal Government, the bank would no longer accept FCY cash deposits into domiciliary accounts.

“We seek to reiterate as follows:  That we shall nolonger accept FCY cash deposits into domiciliary accounts. Withdrawals of FCY cash can be made from domiciliary accounts, irrespective of the mode of payment.

“FCY cash deposits can be converted to naira at the bank’s advised rate. Only wire transfers to and from domiciliary accounts are henceforth possible. “Accounts with aggregate cash deposits of USD50,000.00 and above will attract a charge of 5% flat monthly rate.”

John Omachonu