There was a collective sigh of relief when the Central Bank of Nigeria recently decided to clear the backlog of travel allowances pending with banks. Nevertheless, a lot of well-meaning Nigerians could also see the opportunities for arbitrage and abuse. Of course, bad boys being bad boys, it quickly turned into a bazaar.
The Personal Travel Allowance, PTA, is a carryover of the ancient Nigerian command and control FX policies where the government, acting as the national nanny via the CBN, hands over FX at a subsidized rate of $4K per quarter. Never enough to build a mansion, yet the margins are sufficiently fat enough for anyone to do a quick deal. For example, the difference between the CBN rates and the alternative markets is about N120; that’s about N480K per quarter and N1.9M per year. Even the angels would be tempted.
Meanwhile, that’s nine times the annual minimum wage specified by the Federal Government.
Instead of looking a gift horse in the mouth by blaming the CBN, who could have turned the other way and let everyone roast with the BDCs of this world, some friends and I thought we could come up with ideas on how this can be managed with technology. Our sole object is to help those who need the FX to get them easily while ensuring the opportunity for abuse was minimized. After all, why blame the government for a poor policy if we don’t have clear alternatives.
After bashing our heads against the wall for some hours, we came up with the following:
FX Nanny Online 😊
The interesting thing with the Nigerian traveler is virtually every one of them has a bank account, and with that comes the dreaded Bank Verification Number, BVN. The BVN is probably the best invention to tame financial recklessness in Nigeria, but we are not utilizing up to 5% of its capabilities. That’s a story for another day.
To get FX for travel, the intending traveler would apply online at some random web app to be put up by the CBN. Let’s say it will be at www.fxnanny.cbn.gov.ng.
Travelers will specify the usual details: travel dates, airline ticket reference, travel document details (scanned copy of their passport), bank details, BVN, etc.
At application time, the web app will indicate the likely rate at which the FX will be sold.
The processing team can then review the application and if approved, make FX available by debiting the traveler’s account using the cardholders’ bank process. The processing must be automated, if not, it creates an opportunity for tingodism.
To ensure that abuse is kept to the minimum, travelers’ passports will be automatically validated with the immigration system, tickets checked against airline APIs, and when the traveler returns to the country, the travel records will be automatically checked against immigrations airport database (does that even exist?).
And here comes the kicker. The FX will be available to a specific prepaid card which can only be used in the countries the travelers have specified and verified via their airline tickets. Additionally, the card or FX will only be active from the date of travel and cannot be used in Nigeria at all.
Travelers will need to buy the prepaid card from any bank, or their bank, and automatically, those cards will be tied to their BVN and be available for automatic loading. They won’t need to visit any bank branch.
Anyone found to have abused the system should be banned for half of eternity and made to spend two weeks with EFCC, washing plates and detention cells.
Service could cost about 1% shared between banks, the platform provider and CBN. Someone has to keep the lights on!
Benefits to the Central Bank
- It can finally have peace of mind and stop chasing banks around, hustling them to provide data about FX usage. That sucks a great deal.
- The majority of PTA abuse can now be curbed. Of course, someone will always find a loophole, but that can be addressed when CBN gets to that bridge. Hopefully, not River Niger Second Bridge.
- CBN will be able to have a real-time overview of the PTA market. It will be easy to ferret out insights into which countries people love to traipse to, which airlines love PTA users, which banks are playing games, etc. without issues.
Benefits to Travelers
- With the assurance of a level playing field and the demystification of the man-know-man Nigerian problem, the regular traveler can have hopes of a decent PTA without sucking up to a raggedy teller in a bank branch.
Benefits to Banks
- Earn commissions from processing the debit of travelers’ accounts and crediting the travel card. Should 0.65% be a good incentive?
- The only source of temptation which has killed many budding careers would be taken away. Trust me; bankers regularly get steamrolled for FX infraction. In fact, it’s an existential risk for branch managers.
Apparently, our solution has glossed over many key issues. For example, who is going to build the application and maintain it? Is the CBN going to be allowed by card associations to issue cards? Will it issue MasterCard and Visa cards only? What will it say to Verve, Freedom and Genesis cards?
If the site crashes or slows down, who is going to be held responsible?
What happens when a card is lost, stolen or blocked? What happens when a traveler needs to change his travel plans?
I don’t have answers to these questions, but hey, the world is full of smarties. Anyone can contribute opinions below.