By Amechi Ogbonna
The recent introduction of electronic application for foreign exchange has brought some great relief to customers left in the loop for long following acute shortage of foreign currencies in Nigeria.
For most customers, the ease of access to forex for travelers and operators in the Small and Medium Enterprises (SMEs) brought about by the introduction of “Form A”, especially for invisible transactions like school fees, health bills, training and Basic Travel Allowance, the new scheme as a big relief.
This is because going through that window has reduced for them the huge stress of moving from bank to bank in search of the greenbac.
This has practically been eliminated as customers can simply log on for forex online, with the deployment of the electronic Form ‘A’ which has now facilitated applications for PTA/BTA, medicals, education, and other remittances.
In a circular titled, “Automation of Form ‘A’ on the Trade Monitoring System,” introduced last year and signed by CBN’s Director Trade and Exchange Department, Dr. Ozoemena Nnaji.
To kickstart the scheme, the Central Bank of Nigeria (CBN) had directed that all hard copies of Forms ‘A’ created on or before November 2, 2021 (before the start of the e-Form ‘A’) must be used within 15 working days of the Form’s creation.
Form ‘A’ is an application form designed by the CBN to pay for service transactions (invisible trade) and allows customers to purchase forex at the CBN or interbank rate for payments for eligible services as predetermined by the foreign exchange manual.
The e-Form ‘A’ replaced the hardcopy since November 30, 2021.
Customers are expected to pay a fee of N5,000 per declaration of e-Form ‘A’.
The CBN circular read in part: “This is to inform all authorised dealers and the general public of the deployment of e-Form ‘A’. According to the banking industry regulator, the e-Form ‘A’ shall replace the hard copy of Form ‘A’ for invincible transactions including PTA/BTA, medicals, education, other remittances among others, effective from November 30, 2021.
To this effect, all authorised dealers will be required to ensure that the processing of Form ’A’ shall only be done electronically on the Trade Monitoring System accessible at www.tradesystem.gov.ng.
“The general public is required to obtain a valid Bank Verification Number (BVN) from their authorised dealer banks. The BVN is a prerequisite for customers to access the Trade System for e-Form ‘A’ application.
“The e-Form ‘A’ is web-based and allows the general public to initiate the Form from their offices/homes and submit same to the authorised dealer bank.
A charge of N5,000 as fee per declaration of e-Form ‘A’ is applicable with effect from November 30, 2021, and henceforth. There will be a direct debit from the processing bank’s current account for each declaration which should be recovered the charge on the customer by the bank. However, customers for the e-Form ‘A’ should be separated from other bank charges.
“All hard copies of Forms ‘A’ established on or before November 2 2021 (prior to the commencement of the e-Form ‘A’) shall be utilized within 15 working days of the establishment of the Form.
For the avoidance of doubt, all established hard copies of Forms ‘A’ for which disbursement had not been made within the transition period of 15 working days shall be deemed cancelled.
“All authority dealer banks are enjoined to inform their customers of the development for compliance.”
Analysts noted that the policy would help ease accessibility of forex and related services to Nigerian bank customers.
In recent times, there has been a halt to the rapid depreciation seen in the black market.
The CBN Deputy Governor, Corporate Services Directorate, Mr. Edward Adamu, who disclosed this, noted that, “the initial panic-driven depreciation at the parallel market has gradually given way to real market forces.”
He added: “Against the backdrop of tight liquidity management and the recent modification of the forex management strategy, the naira exchange rate has remained stable since the last adjustment at the Investors and Exporters (I & E) window.
“Apparently, the revised forex management strategy, which excludes Bureau De Change (BDCs) from direct sales, is working as a substantial share of forex demand has migrated to the deposit money banks’ window. We should expect this pattern to continue in the coming months as confidence in the modified framework grows.”
According to the CBN Governor, Mr. Godwin Emefiele, the apex bank would be willing ready to approve legitimate forex demand that exceeds the approved transaction cap if such applications meet stipulated requirements.
Emefiele said the CBN was ready to approve requests from commercial banks to go beyond the caps if proven that the extra demand for FX was for legitimate purposes.
“Indeed, I want to put it on record that if the amount you want is even above the limit that is recognised and we find that the reason you are making those demands is legitimate, your bank will speak to us and we will give you more than what is even the limit.”
He also said that the Investors and Exporters Window opened by the apex bank remains the major market for people seeking to procure or sell foreign exchange.
While urging customers to go to their banks for their forex needs, the CBN Governor had said, “The only exchange rate that I recognise today in the Nigerian foreign exchange market which is the dominant market remains the Investors and Exporters (I&E) window.”
Emefiele, reiterated the need for extensive structural reform this year to fast-track the country’s economic growth. He stressed that extensive structural reforms were required to ensure that long-run paths of growth surpass potential.
The CBN governor noted that as business sentiments brightened, following the various supply-side supports by the apex bank and orderly implementation of macroeconomic policies, he expected domestic fragility to diminish with benign knock-on effects on welfare and livelihood.
He said, “Our medium-term goal is to fast-track growth above historic average. Economic activities may reach pre-pandemic levels if the resilience of non-oil activities (especially agriculture and manufacturing sectors) are given continued impetus.”
For instance, in his recent article on the subject matter, a university don and member of the Central Bank of Nigeria (CBN) Monetary Policy Committee (MPC), Prof. Mike Obadan, restated the relevance of foreign exchange in the context of global trade, payments and capital flows into and out of a country. He pointed out that foreigh exchange forms a major component of a country’s external reserves which according to the International Monetary Fund (IMF) consists of “official public sector foreign assets that are readily available to, and controlled by the monetary authorities, for direct financing of payments imbalances, and directly regulating the magnitude of such imbalances, through intervention in the FX markets to affect the currency exchange rate and/or for other purposes”.
Against this backdrop, he argued that the Central Bank of Nigeria Act, 2007, Section 24, mandates it to maintain external reserve assets in gold coin or bullion, balances in banks outside Nigeria, foreign short-term treasury bills and medium-term securities, Special Drawing Rights (SDR) of the IMF,
The CBN Act 2007 enjoins the Bank to, “use its best endeavour to maintain external reserves at levels considered by the Bank to be appropriate for the economy and the monetary system of Nigeria.”
In light of this reality, he said the CBN will continue to carry out its mandate by using supply and demand management strategies, particularly, forex conservation and control measures as well as measures to ensure adequate supply of foreign exchange.
“This is particularly so because forex is a scarce resource that needs to be efficiently managed if the country is to achieve macroeconomic stability and avoid prolonged balance of payments and external reserves challenges.
Commenting on the impact of the policy, Mr Victor Chiazor, Head, FSL Securities, said, “this policy will help ease accessibility of FX and other related services to Nigerian bank customers. This is because there has been a noticeable quick depreciation of FX seen in the black market. Also with the CBN ready to approve legitimate FX demand that exceeds the approved transaction cap, it is a welcome development because FX is relevant in the context of the present global economy. In terms of how far this policy will help reduce lost time for FX applicants, I still feel a bit of concern in that space but we will watch what happens in that regard”
This was as the Chairman, SMEs Group, LCCI, Daniel Dickson-Okezie, believes that the electronic form A is just part of several initiatives of the CBN to ensure easy access to forex and related services to Nigerian bank customers. According to him, the application is not without it’s challenges which may include validation of TIN number; discripancies in email addresses at point of registration; network instability and high down turn frequency.
Overall he contends that the benefits of the initiative which include the automation of international trade trànsactions; reduction of turnaround time from importation to clearing stage of all international transactions are enormous for the businesses which need the services to be delivered with the speed of light.
For his part, Chairman, Financial Services Group of the LCCI, Obinna Anyanwu, said the Form A experiment is still a new initiative.
“I have not accessed it and for now no complaints from anybody who has accessed.
It’s a commendable effort of the CBN. We should be driving towards the digitisation of our processes and move away from the manual operations with their associated imperfections.”
The technology is there. That is what obtains in other economies and I will support we should migrate to digital platforms where everything will be transparent.
You can see that from the point of application to submission, you can assess how long it takes for a transaction to be concluded. So, when all the bureaucracies are removed you will know where the bottleneck is. It’s a good thing. The most important thing is for the banks to be able to support the initiative to ensure it is seamless so that Nigerians can enjoy the services, especially the SMEs.”
In his reaction, Dr Muda Yusuf, CEO at Centre for Private Enterprise said he was yet to get acquainted with the new application and so would not know how to comment on it. “I don’t understand the form A
The BDC, Aboki FX were banned, yet those did not solve the problem on ground.”
Also chairman, Apapa branch of MAN said he was not competent to comment since he has not been used the platform.