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New CBN Forex policy, its Implications, losers & Gainers

The Central Bank of Nigeria (CBN) on Monday, 20th February 2017 released a press statement on a new Forex policy which it titled “New Policy Actions in the Foreign Exchange Market.” This action comes a week after the National Economic Council had requested for a review of the current Forex policy due to the wide gap between the parallel and official market exchange rates.

According to CBN, “In continuation of efforts to increase the availability of Foreign Exchange in order to ease the difficulties encountered by Nigerians in obtaining funds for Foreign Exchange transactions, the Central Bank of Nigeria (CBN) is providing direct additional funding to banks to meet the needs of Nigerians for Personal and Business Travel, Medical needs, and School fees, effective immediately,”.

CBN is ready or committed to supplying the necessary Forex needed for transactions such as PTA, BTA, School fees and medical bills. However, the CBN failed to mention the exchange rate at which this Forex would be trade at but said that banks should sell not more than 20 percent above the interbank market rate. In other words, if the interbank is trading at N320, banks will sell for as high as N384.

WHAT DOES THE NEW FOREX POLICY STATE?

  1. That CBN would immediately begin to provide forex to all commercial banks to meet needs of both personal travel allowances (PTA) and business travel allowances (BTA)

“The CBN would immediately begin to provide foreign exchange to all commercial banks to meet the needs of both personal travel allowances (PTA) and business travel allowances (BTA) for onward sale to customers. All banks would receive amounts commensurate with their demand per week, which would be sold to customers who meet usual basic documentary requirements.”

What is its implication?

This means that commercial banks will sell to customers who wish to travel for business or personal trips when they present the necessary document, which includes their passport, visa, and tickets. However, the CBN failed to mention how much these travellers are entitled to for their trips.

“In order to further ease the burden of travellers and ensure that transactions are settled at much more competitive exchange rates, the CBN hereby directs all banks to open FX retail outlets at major airports as soon as logistics permit,” CBN said.

With this new policy, all banks that do not have an outlet in the airport may not sell to customers at the airport.

  1. That CBN would immediately begin to provide forex to all commercial banks to meet needs for School and Medical fees abroad

“The CBN would meet the needs of parents, guardians and sponsors who are seeking to make payments of school and educational fees for their children and wards. Such payments must be made by commercial banks directly to the institution specified by the customer,”

“The CBN would ensure that this process is as smooth as possible and that as many customers as possible get the foreign exchange they genuinely demand. This would also apply to customers seeking to make payments, or purchase foreign exchange, for medical bills and paid directly to hospitals.”

This means that by just being a sponsor you can have access to Forex to pay for school fees. However, you won’t be given cash to make the payments. The bank will make the payments directly to the bank account of the school or hospital.

  1. That CBN would immediately begin to provide forex to all commercial banks to meet needs for Manufacturing sector 

“Given our plan to meet all unfilled orders, and while provision of FX to the manufacturing sector would remain the CBN’s strong priority, we will no longer impose allocation/utilisation rules on commercial bank.”

This means that the CBN will still give the manufacturing sector a strong priority during allocation of Forex but the rule on 60:40 allocation of Forex has been removed.

Who are the gainers in this new forex policy?

  1. Travelers

From all indications the gainers of this policy are going to be the commercial banks and travellers, which include those going on both business and personal trips. Travellers will have access to the Forex easily and will not have to queue, lobby or wait for the money needed for their trips.

  1. Banks

Commercial banks in Nigeria will likely become royalty. This is because they have been given the power to have access to as much Forex as they want. If all things go well, there will be an increase in the volume of trade and customers may not have to complain about the lack of Forex. The only setback with this decision is that the banks may be tempted to start round tripping or hoarding Forex thereby manipulating the market.

  1. Importers

Who are the losers in this new policy

  1. Speculators
  2. Bureaux de Change

Speculators and Bureau de change could be the biggest losers from this new policy. The only customers for the speculators and Bureaux de Change will be the users of the 41 items banned from getting access to Forex. On the other hand, since the Bureaux de Change was not mentioned in the adjustments to the policy, they will have to continue sourcing for funds in the autonomous market as they have done in the past.

 

Speculations:

*Naira will continue to appreciate for some time.

*MoneyGram will start working.

*Western Union money transfer will start working.

*Speculator will start buying and hoarding dollars.

Nigerian Bank ATM card withdrawal & USSD code transfer limits

ATM Card withdrawal limits in Nigeria and outside Nigeria

There is an adjustment in the Nigerian bank ATM card withdrawal limits.

In the new adjustment, all ATMs that were enabled for domestic and foreign transactions have been restructured to limit Naira cash withdrawal at ATMs to N150, 000 per day (i.e. domestic withdrawal limit is N150, 000 per day) while foreign currency is $300 per day. The cash can be withdrawn from ATM machine in multiples of 5000, 10000, 15000, 20000, 25000, 30000 and 35000 depending on the bank’s ATM.

The new adjustment has separated traditional ATM from MasterCard credit card where the former has now been deactivated and can no longer be used for transactions abroad.

A single ATM card serves for transactions for both domestic and abroad.

The adjusted ATM cards now have spending limits on POS and eCommerce (online shopping) pegged at $300 (that is about N60, 000) per day. On December 2016, some banks further limits online shopping spending limit to $100 per day. Unlike before, the limit was N2 million per day.

 Currently, the funding limit of third party account like Skrill account, PayPal, Payoneer etc. is pegged at $100 per month.

In this new arrangement, a bank customer with multiple debit cards (ATM cards) can only transact abroad with one linked to the primary transactional account. Such customers could also transact with any of the cards that is funded.

However, banks are working hard to ensure that there are alternatives in these adjustments for an customers are now being directed by their banks to reapply for a new card arrangement to suit their purposes.

In view of this, GTBank now has Dollar MasterCard which is primarily for limitless online shopping, payment making and other transactions abroad and online from the domiciliary account.

Nigerian Bank USSD transfer limits

Banks like GTbank, Fidelity, Access bank, Diamond bank etc. allows a maximum USSD code transfer limit of up to N200, 000 per transaction and maximum transfer limit of N500, 000 per day while Firstbank of Nigeria claim to allow a maximum transfer limit of up to N1million per day.

 

Please note: This post will be updated if there is change or adjustment in above mention ATM cards withdrawal and transfer limits, so always visit to check for update.