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HomeBanking & FinanceExchange RatesNigerians Reject Limits On $100 Debit Card Spending Abroad

Nigerians Reject Limits On $100 Debit Card Spending Abroad

Nigerians are not happy with their banks for slashing card spending limit on foreign transactions from $500 to $100 over dollar scarcity.

Many of the commercial banks have communicated the new policy to their customers. The policy was triggered by rising dollar scarcity, prompting the Central Bank of Nigeria (CBN) to ration dollars.

The banks are already turning down payment requests from customers paying business partners abroad with naira debit cards.

Banks are now asking customers paying clients abroad to do so in the currency of the beneficiary’s country, not in naira. The new practice differs from previous one where lenders debited the naira accounts of customers at prevailing exchange rate  and remitted dollar equivalent to the offshore beneficiary’s account.

The old practice was depleting foreign reserves and putting pressure on naira exchange rate against the dollar at a time Nigeria’s dollar earnings are on decline due to low oil prices caused by Coronavirus pandemic.

Many banks not only insisting that customers pay in the currency of the recipient’s country, but through inflows from abroad in line with CBN’s domiciliary account policy which directed that only electronic fund transfers into domiciliary accounts can be transferred from such accounts to third parties while cash deposits into such accounts can only be withdrawn in cash.

In an emailed explanation to a customer on why her transaction request was declined, GTBank said it was based on a temporary restriction it placed on Dynamic Currency Conversion (DCC) on all banks’ cards.

“Dear Valued Customer, Declined Card Transaction: DCC Restriction. Thank you for using your GTBank Naira MasterCard. Please be informed that your transaction with the details below could not be completed because you have selected the DCC payment option (Dynamic Currency Conversion) that allows you to pay in Naira, which has been temporarily restricted on all our cards. Please reattempt the transaction and select the currency of the country you are transacting in,” GTBank Card Services Team emailed one of its customers paying for online advert placement on Facebook with her naira debit card”.

Banks are not honoring card payments, many foreign investors are not able  to get their money out and manufacturers are unable to import vital raw materials as output hurtles toward a second contraction in four years. Dependent on oil exports for half of its revenue, the Federal Government’s  coffers have emptied after crude prices plunged in the wake of the coronavirus pandemic.

There is also little prospect of a respite any time soon: it needs oil prices of $70 per barrel and production of two million barrels a day to balance its budget, but prices are hovering around $40 and OPEC curbs have restricted the nation’s output to about 1.4 million barrels a day.

The evaporation of foreign income forced the CBN to halt weekly interbank foreign-currency sales since March. Now the effects of the dollar shortage are seeping through to the economy.

“A lot of the members can’t access the amount of dollars they need from the banks,” said Eke Ubiji, executive secretary of the Nigerian Association of Small and Medium Enterprises. “That is constraining business.”

For instance, GTBank, has  cut the amount of foreign currency customers can spend on payment cards abroad to $100 a month from $3,000. Rules on what companies do with the dollars they receive have also been changed, said Emeka Mgbeahuru, who runs Tropitec Ltd., an importer of agricultural equipment from Italy and China with distribution links across west and central Africa.

Also, in emailed notes to customers, First City Monument Bank says: “Please be informed that the monthly spending limit on your FCMB Naira Mastercard/Visa card has been reviewed further from $300 to $100. This means you can only spend $100 or its equivalent monthly for international transactions, available only for POS and Online transactions (ATM cash withdrawal abroad has been suspended). If you require higher international spending limit, we encourage you to apply for a foreign currency card (Domiciliary Account required),” the bank said.

The customer, Michael Obi, said he was not happy with the development, which she said was affecting her business. 

Head of Research, Afrinvest West Africa Limited, Abiodun Keripe, explained that it is the CBN that makes dollar payment for customers after their naira accounts are debited for transactions. He however said  the CBN’s ability to pay dollar on customers’ behalf is dependent on the Nigeria’s available dollar reserves, which have been on decline even before the outbreak of the novel coronavirus in December leading to drop decline in crude oil prices. Brent crude fell to $44.50 per barrel.

The CBN Governor, Godwin Emefiele has rolled out policies to conserve foreign exchange and protect the naira. The new domiciliary account policy that sets limits on dollar transactions, restriction of importers’ access to dollars and sale of high-yielding debt to foreign portfolio investors are some of the policies.

The CBN also restricted importers of milk from accessing foreign exchange from official market and limited the importation of milk and other dairy products to six firms- FrieslandCampina WAMCO Nigeria; Chi Limited; TG Arla Dairy Products Limited; Promasidor Nigeria Limited; Nestle Nigeria PLC (MSK only), and Integrated Dairies Limited.

Emefiele has also assured foreign investors that repatriating their funds from the country was secured despite forex related revenue shortages due to the drop from the sale of crude oil globally.  He explained that the apex bank had put in place policies to ensure an orderly exit for those that might be interested in doing so and also urged investors to be patient as such repatriations are processed, owing to the bank’s policy of orderly exit of investments.

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