The Central Bank of Nigeria (CBN) is set to introduce a card based regime for business travel allowance (BTA), personal travel allowance (PTA) and Estacode, which experts believe is an attempt to further curb sharp practices in the nation foreign exchange market, Babajide   Komolafe writes

Business Travel Allowance, BTA, is the   foreign exchange allowed by persons travelling abroad for business purposes, while Personal Travel Allowance, PTA, is the foreign exchange allowed for persons travelling for private reasons like holiday.
Estacode, on the other hand, is the foreign exchange allowed to government officials travelling abroad to cover their travelling expenses.

Presently, an individual is allowed $5000 per quarter for BTA and $4000 per quarter for PTA. But under the present regime all the foreign exchanges are collected in cash.  However, under the new regime foreign exchange end users would have to use prepaid cards to collect BTA, PTA and Estacode.

Speaking at the re-launch of Cash Passport prepaid card by Travelex, Deputy Director, Foreign Operations department, CBN, Mr. J.J Aluko disclosed that under the card based scheme 80 per cent of Estacode, PTA and BTA would be paid to foreign exchange end users through prepaid card while the remaining 20 per cent would be paid in cash. This he explained was to ensure that travelers have some cash on them in case they experience any problem with their card.

Speaking further he disclosed that the apex bank has chosen three service providers for the implementation of the scheme. He said the bank was fine tuning the operational procedure for the implementation of the new regime and very soon it would be rolled out. Aluko’s disclosure was on the heel of calls by Travelex for the elimination of the present cash based PTA/BTA regime for a card based regime.

Speaking earlier at the  at the occasion, Managing Director, Emerging Markets, Travelex Partners, Mr. Mark Smith stated that, the present cash based BTA|PTA regime in Nigeria has a number of shortcomings. First the reliance on cash is fraught with obvious security risks at the level of individual end users. Second, it is not in line with global movement away from cash to electronic based payment systems.

It is somewhat strange in today’s world to find that in the whole of Nigeria, most travelers going abroad have to obtain the relevant travel allowances all in cash. Thirdly, and most importantly, the cash based allowance regime currently in operation put undue pressure on the stock of cash foreign exchange at the disposal of both the CBN and individual banks. It is our suggestion, therefore, that the CBN should consider the option of emphasizing a card based BTA|BTA regime. First, it will reduce the pressure of demand for cash in the system. Second, we suggest that the CBN should raise the level of BTA|PTA for travelers who opt for electronic cards.

Third, it will enable the system to cater for the needs of the small business travelers who exert the greatest pressure on the demand for foreign exchange in the country. Fourth, this option will make the parallel market less attractive for this category of travelers and thus assist the correction of the abnormalities in the present system.

Foreign exchange expert have commended the initiative saying it will enhance the move to payment cards. A senior bank treasurer said that the CBN is trying to reduce the amount of cash people hold while travelling. It=s all an attempt to cash, he said but it will no doubt significantly reduce sharp practices. Another bank treasurer noted that the new regime might be an attempt to reduce roundtripping of official foreign exchange into the parallel market and money laundering.

A lot of the foreign exchange allocated for BTA, PTA and Estacode are usually round tripped into the parallel market. But with the new regime, the CBN will be able to monitor the foreign exchange people collect for this purposes, he stated. But the Chief Executive of a Bureau De change company noted that while the new scheme is good, it does has anything to do with the parallel market. It is a good policy and it will help in reducing cash but its effect on the parallel market is something else. “I believe the use of card especially for Estacode is optional except the government makes it mandatory and that would be after some time of implementation during which its effectiveness and efficiency would have been ascertained. But you know people can also take advantage of the scheme by exploiting it for selfish purposes,” he observed.

Corroborating this view the former Chief Executive of a Bureau De Change Company, noted that while the policy is good given the global move from cash to card, but it might not be effective in checking sharp practice. For example people can still use the prepaid card to get cash from ATM when they get abroad and roundtrip the cash. Besides this there are other ways that people can use to roundtrip foreign exchange. So the issue of forestalling sharp practice is another thing entirely. But it will no doubt reduce the amount of foreign currency that people go about with, he said

Financial Vanguard investigation revealed that the card based regime was actually the brain child of Travelex. A source close to the company told Financial Vanguard that the company has been urging the apex bank for a long time to institute a card based regime for BTA and PTA adding that that was one of the reason why the company introduced the Cash Passport prepaid card in the first instance in 2004. Investigation, also reveal that the re-launch of Cash Passport is in preparation to the introduction of the card based regime.

Given its closeness to the apex bank and the critical services it renders by providing wholesale foreign currency to the bank, Travelex might be one of the three service providers chosen by the CBN to implement the new scheme and hence the re-launch of Cash Passport. According to experts Cash Passport is a good product but the problem is that Travelex did not market it when it was first launched in 2004, and they did not encourage foreign exchange end users to purchase it. According to a source there are situations where the cards are not even available at the company=s retail outlets. In addition to this experts said the charges involved were quite high and this scared end users away from the product.

Perhaps, it was in an effort to correct these observed lapses that the company decided to involve banks in the marketing of Cash Passport. Speaking at the re-launch, Smith disclosed that three banks have been chosen to partner with Travelex namely UBA, IBTC Chartered and Union Bank adding that the door is open to other banks. He also allayed operators’ fears about the charges saying that the charges have been reviewed and are now competitive.

He explained occupies a unique position in the league of prepaid cards. It enables the traveler to load his or her Business Travel Allowance or Personal Travel Allowance onto a CASH PASSPORT which can be encashed at Visa enabled ATMs all over the world as well as used at the point of sale at Visa enabled merchants all of the world. The other advantages of the card include the following:

It is re-loadable; The customer has access to his cash on a 24/7 basis; It is safe from the risks associated with possession of cash; It is PIN protected thereby giving the customer greater privacy and control of the security of the product; The new CASH PASSPORT has point of sale (POS) capability which means that users can make purchases with their cards all over the world.