Nigeria issues welcome reform to forex for overseas study
Published 23/02/2017
Nigeria’s central bank has begun selling a fresh supply of dollars for students to pay for school fee payments and travel abroad, increasing the amount they are allowed to buy and enabling them to avoid paying heavy premiums for the currency on the black market.
The move comes as great relief to students who have struggled for almost a year with long processing times for foreign currency applications and inflated exchange rates.
On February 20, the Central Bank of Nigeria said it would begin supplying dollars immediately to retail clients via commercial lenders to cover tuition fees and a personal travel allowance for students with plans to study overseas.
The Central Bank of Nigeria will begin supplying dollars immediately to retail clients via commercial lenders
In a circular issued to banks authorised to sell currency, the CBN said it was making more currency available “to ease the difficulties encountered by Nigerians in obtaining funds for some invisible transactions”.
Foreign currency for study abroad has been difficult to come by in Nigeria since March last year, when the government announced that the Central Bank of Nigeria would no longer sell it. It began issuing foreign currency again in June 2016, but the amount customers have been able to access has been heavily restricted.
As a result, people have been reportedly paying 40% premiums on dollars on the black market because they have been unable to obtain them through retail banks.
Combined with the already low value of the naira, this lack of access to currency has curbed access to study abroad. The effect has been especially marked in the UK, which has been rendered unaffordable for many students.
But the Central Bank of Nigeria announced on Monday that it would begin supplying dollars immediately to retail clients via commercial lenders.
Students who are studying overseas will be allowed to buy up to $4,000 per quarter as a personal travel allowance. Their travel must require a flight lasting at least five hours to qualify.
Parents or guardians of students who can produce a letter of admission and invoice from an overseas school will also be able to buy $15,000 per semester to cover tuition fees, which must be paid directly into the school’s account.
In addition to school fees, the new policy will also be applicable for medical needs, as well as personal and business travel.
The amount should be enough to cover students’ tuition fees in most cases and will have a “huge impact for Nigerian students looking to study overseas”, Stuart Rennie, managing director of SJRennie Consulting, told The PIE News.
“It means students will be able to secure much larger sums of foreign currency to help pay deposits to universities, but more importantly, it means they will not have to pay the exorbitant rates currently in place on the black market,” he added.
Yomi Asade, senior branch manager at UKEAS Nigeria, said the announcement is “certainly a step in the right direction”.
“It will stabilise the student recruitment market and provide confidence to parents and sponsors paying the tuition fees”
“[It] would go a long way in increasing the number of students aspiring to study overseas this year as students along with their sponsors may now be able to transfer tuition fees through the banks at the interbank rate which is much lower than the parallel market/black market rate,” he told The PIE News.
The sales will be subject to strict conditions. Retailers may charge no more than 20% above the interbank market rate, which ranges from 305-315 naira to the dollar. In comparison, the parallel market rate has risen to 517 naira to the dollar, CBN spokesman Isaac Okorafor said in an interview last week with Arise News Network.
In a statement, the CBN said it would “ensure that this process is as smooth as possible” and “that as many customers as possible get the foreign exchange they genuinely demand.”
Rennie praised the government’s quick response to the reverse the forex policy that “was not working”.
“It will stabilise the student recruitment market and provide confidence to parents and sponsors paying the tuition fees,” he commented.
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