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Automation of FX Allocation & Utilization Process

Over the years, Nigeria has been an import-dependent economy with a growing demand for foreign exchange. The Central Bank of Nigeria (CBN) works harder every day to preserve the value of the domestic currency and stabilize the economy in Nigeria. However, individuals and businesses are constantly in need of or require foreign currency to pay for services, fulfil trade obligations, or access PTA/BTA funds.

For the CBN to regulate access to scarce foreign exchange, it has put in place several active [SA1] windows which include: the Retail SMIS Funds, SME Form Q Funds, the Investors & Exporters Funds (I&E) and the Invisibles Funds (PTA/BTA, Medicals and Education). Despite these initiatives, the FX demand continues to outweigh the supply. Thus, leaving individuals and corporates to source FX at a higher rate from the parallel market.

Due to the wide gap between the official market rate and the parallel market rate, individuals and businesses prefer to seek FX from banks, prompting the CBN to continually review its regulation of banks for Nigerians who intend to access these intervention funds.

Nigerian banks as part of their responsibilities must monitor funds provided to them by the CBN, ensure that applicants meet all CBN requirements, provide regulatory reports and ensure that customers receive their allocations as the funds become available.

Union Systems’ KACHASI Trade Finance Software is designed to process FX transactions from the request stage through allocation, to remittance stages in several currencies with SWIFT messages generated and sent when necessary. In addition to monitoring cash balances after allocation, Kachasi takes into account all the CBN’s regulations as well as the predetermined quarterly limits. Kachasi also generates daily utilization reports, other DTRs, internal and regulatory reports

With the entire FX Funding process being completely automated on Kachasi from beginning to end, customers are responded to promptly and they get real-time updates on all their trade transactions from the Kachasi customer-facing portal.

In addition to the SME form Q funds and the Invisibles funds, another active FX window for settlement of trade obligations in Nigeria is the Retail Dutch Auction System (RDAS) also known as the Retail SMIS, which holds customer-based auctions every two weeks. Customers are permitted to submit their bids through dealer banks at a variety of rates, leaving the CBN in charge of allocating funds and determining the value date of every bid.

Painfully, the communication of successful bid results from the CBN to authorized dealer banks leads to more manual processes for the banks. Due to this and the severe deadlines for sending bids to CBN before the offer for that session closes, a lot of banks find the retail process to be cumbersome.

Once again, the advanced automation of these processes on Kachasi Trade Finance Software streamlines the retail bidding procedures so that no manual input or disparate solution is necessary. To simplify the FX correspondent banking activities, Kachasi is equipped with a Character Recognition Intelligent System called CRIS that processes the CBN results on the application. Additionally, Kachasi can be configured to generate debit entries for these transactions whenever the bank desires, whilst notifying customers of the breakdown of debits from their accounts.

The Investors & Exporters FX Window also referred to as the “I&E Window,” provides a platform for the purchases and sales of FX for the purpose of trade settlements. I&E FX Window is the market for Investors, Exporters, and End-Users that enables FX deals to be performed at exchange rates predetermined by current market conditions (Demand and Supply). Furthermore, Kachasi is designed to process I&E transactions without any hiccups while still allowing banks to keep their spread per transaction.

For customers who already have FX in their domiciliary accounts and need to pay for their trade commitments and services, Kachasi also has the capability to handle domiciliary transfers.

This piece is brought to you by Union Systems Limited: Africa’s leading financial software company. For more information or a demo of how the Kachasi Trade Finance Software works, Click here