Banks are beginning to reduce interest rates on foreign currency (FX) deposits as the dollar supply increasesThis action contributes to a decline in foreign deposit currency rates by indicating that banks now have enough FXAs financial firms adjust to shifting market conditions and changes in apex bank policy, the transition takes place
Henzodaily.ng journalist Zainab Iwayemi has 5-year-experience covering the Economy, Technology, and Capital Market.
As the dollar supply improves, banks are starting to lower their interest rates on foreign currency (FX) deposits.
Some banks have started offering their clients Personal Travel Allowance and Business Travel Allowance again. Photo Credit: Anderson Ross
Source: Getty Images
During an executive roundtable organized by PwC and BusinessDay on Thursday, Olusegun Alebiosu, the CEO of First Bank of Nigeria, disclosed that the Central Bank of Nigeria (CBN) restored certain foreign exchange swaps to certain banks in January 2025.
“This move signals that banks now have sufficient FX to return to customers, contributing to a drop in foreign deposit currency rates,” he said.
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This was confirmed by a senior bank executive to BusinessDay at another Tier-1 bank, who also mentioned that FX supplies have improved among banks, relieving economic strain.
BTA, PTA sales resume
Following past difficulties linked to supply constraints, certain banks have started offering their clients Personal Travel Allowance (PTA) and Business Travel Allowance (BTA) again, indicating the availability of foreign exchange.
The transformation occurs as financial firms adapt to changing market dynamics and shifts in apex bank policy.
Agusto Consulting’s head of financial institution ratings, Ayokunle Olubunmi, provided an analysis of the foreign exchange market’s dynamics.
He clarified that clients had little reason to contact banks for PTA when the difference between official and parallel market rates was minimal. According to him, there were times when people preferred parallel market pricing because the official market rate was higher.
Olubunmi pointed out that more Nigerians are increasingly requesting PTA and BTA directly from banks as a result of the growing distinction between these rates.
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The modification is in line with the CBN’s policy changes from the previous year, which were made to stabilize the foreign exchange market.
A shift toward market-determined rates was evident in early 2024 when the CBN instructed International Money Transfer Operators (IMTOs) to provide exchange rates for Naira payouts based on current market pricing.
The CBN abolished limitations on interbank foreign currency transaction spreads and interbank proceeds sales limits in February 2024.
Additionally, it required that PTA and BTA payouts only be delivered via electronic channels, which Afrinvest Securities Limited analysts thought would lessen the likelihood of foreign exchange round-tripping in this market.
The apex bank said that it has authorized the publication of the Nigerian Foreign Exchange (FX) Code and will formally launch it on January 28, 2025, to expedite this process.
The banking sector adheres to the FX code to encourage the moral behavior of authorized dealers in the Nigerian Foreign Exchange Market (NFEM).
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CBN issues instructions to banks
Henzodaily.ng reported that the Central Bank of Nigeria (CBN) has issued guidelines for implementing the free foreign exchange deposit window announced by the federal government.
The FG’s exchange window, which kicked off on October 31, 2024, provides a nine-month amnesty for Nigerians with foreign currencies at home to disclose and deposit the same in banks without paying taxes or penalties.
In a circular with reference number FPR/DIR/PUB/CIR002/013 to banks dated November 5, 2024, the CBN clearly stated the dos and don’ts of the scheme.
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Source: Henzodaily.ng