Nigeria is a country of paradoxes and contradictions. These contradictions are being inflicted on the nation by politicians in uniform and those in flowing gowns through half-baked policies. Most of these policies, once they favour the ruling class, become self perpetuating.
In the pre-Structural Adjustment Programme (SAP) era, when Nigerians who planned to travel abroad approach their bankers for foreign exchange, they were given such monies in traveller’s cheques. There was no direct cash sale in foreign exchange. Then it was not common to see dollars or pounds in cash. It was only from those returnees that such foreign exchange in cash was found.
The value of the naira was strong and a very good means of storing value. But when SAP was introduced, in the bid for the country to earn foreign exchange that was scarce then, the CBN allowed exporters to open domiciliary accounts, hotels and restaurants were also given the nod to charge foreign guests in dollars. In more recent time, the CBN ordered banks to pay Nigerians who are beneficiaries of fund transfer in the denominated foreign currency.
Coupled with this is the fact that the CBN shot itself in the foot with the wrong monetary policy of cash sales of dollars to Bureaux de change. Over time, because of the heavy depreciation of the naira as a result of the introduction of market determined exchange rate, Nigerians started preferring dollars to naira as the economy became awash with the dollar. This would not have happened if the apex bank had continued to insist that those who do not use direct fund transfer, electronic cards be issued with traveller’s cheque.
Now, what is a traveller’s cheque?
It is a pre-printed, fixed-amount cheque designed to allow the person signing it to make an unconditional payment to someone else as a result of having paid the issuer for that privilege. They were generally used by people instead of cash as many businesses used to accept traveller’s cheques as currency. If a traveller’s cheque was lost or stolen, they could be replaced by the issuing financial institution. Their use has been in decline since the 1990s as alternatives, such as credit cards, debit cards and automated teller machines became more widely available and were easier and more convenient for travellers.
Traveller’s cheques before now, were sold by banks and financial specialists to customers for use at a later time. Upon obtaining custody of a purchased supply of traveller’s cheques, the purchaser immediately signed his or her signature once upon each cheque, usually on the cheque’s upper portion. This helps to protect them if they are stolen. The purchaser will also have received a receipt and some other documentation that should be kept in a safe place other than where he or she carries the cheques.
A traveller’s cheque can usually be replaced if lost or stolen (if the owner still has the receipt issued with the purchase of the cheques showing the serial numbers allocated). When wanting to cash a traveller’s cheque while making a purchase, the purchaser was required in the presence of the payee, to date and countersign the cheque in the indicated space, usually on the cheque’s lower portion (if at a restaurant, it may be helpful to ask the waiter to watch and wait for this to be done.)
Applicable change for a purchase transaction would be given in local currency as if the cheque were bank notes. Traveller’s cheques are available in several currencies such as U.S. dollars, Canadian dollars, Pounds sterling, Japanese yen, Chinese Yuan and Euro; denominations usually being 20, 50, or 100 (x100 for Yen) of whatever currency, and are usually sold in pads of five or ten cheques, e.g., 5 x 20 for 100.
Traveller’s cheques do not expire, so unused cheques can be kept by the purchaser to spend at any time in the future. The purchaser of a supply of traveller’s cheques effectively gives an interest-free loan to the issuer, which is why it is common for banks to sell them “commission-free” to their customers. The commission, where it is charged, is usually 1-2% of the total face value sold.
The question is; why has the CBN jettisoned the use of traveller’s cheque in favour of cash sales? The CBN is where most banks get their traveller’s cheques from in the days when they were in use. Now that in Nigeria the dollar has become a second currency thus undermining the sovereignty of Nigeria and the legal tender status of the local currency, the naira, what is the CBN waiting for to reintroduce the use of traveller’s cheques in the country? Will this not help its cashless policy? Will this not ensure stability in the foreign exchange market if Nigerians do not have direct access to dollar cash? Will the value of the naira not be enhanced? Is the cashless policy restricted to the use of naira? CBN please think.