Speculators bet on dollar over signaled stoppage of sales to banks

While Nigerian banks are seen limiting dollar spend by users amid fear of alleged supply stoppage by the Central Bank of Nigeria (CBN), speculators in the market are betting big on the greenback against the naira.

Godwin Emefiele, governor of the CBN, during a press conference after the bankers’ committee meeting in February 2022, gave a hint about the imminent stoppage of dollar sales to banks, of which analysts have called for a rethink.

Consequently, Nigerian lenders have started issuing notices to their customers on dollar spend downward review by between 50 percent and 80 percent.

“Due to current market realities on foreign exchange, we’ve reviewed cross-border transaction limits for the Naira Mastercard and the Naira Credit Card to $50 monthly,” First Bank, Nigeria’s tier-one bank said on Thursday.

“For increased transaction limits, please use your Visa Debit Multi-Currency Card, Visa Prepaid (USD) Card and Visa Gold Credit Card to enjoy transaction limits up to $10,000 and other exciting benefits. Don’t have any of these cards? Simply visit the nearest branch or our website to request for one,” the bank said in a notice to its customers.

Zenith Bank, Nigeria’s systemic important bank has temporarily suspended the use of its Naira Cards for international Automated Teller Machines (ATM) cash withdrawals and PoS transactions.

The bank disclosed this in a statement issued to its customers. Additionally, the bank has reviewed its monthly card international spend limit for web transactions from $100 to $20. The review according to the bank is in response to today’s economic realities.

“If you have higher international spend requirements, simply visit any of our branches and request for a foreign currency debit or pre-paid card, which are available in US dollars, pounds and euro variants.

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In August 2020, most Nigerian banks reduced their spending limits for their naira-denominated debit cards used for paying for transactions abroad from $500 to $100.

GTBank on Friday reduced its spending limit on the Naira MasterCard for international online and POS transactions from $100 to $20 monthly.

Consequently, naira’s free fall continues at the parallel market as one dollar now sells for N580 as against N565 last week.

Ayokunle Olubunmi, head, financial institution ratings at Agusto Consulting, a pan-African credit rating agency, noted that the CBN has been rationing dollars to banks.

He said that what the banks get is what they give to their customers, adding that the development will impact the economy and spur inflation as Nigeria’s economy is import-dependent.

If the intending decision of the Apex bank to stop dollar sales to banks at the end of the year is implemented, it will likely result in systemic shocks, according to Muda Yusuf, chief executive officer of The Centre for the Promotion of Private Enterprise (CPPE).

Other implications include business disruptions, macroeconomic dislocations and weakening of investors’ confidence.

“A much deeper and robust Investors and Exporters (I&E) forex window should be in place before the CBN can contemplate a termination of its forex market interventions,” Yusuf said.

Hope Moses-Ashike

Hope Moses-Ashike is an Associate Editor, Banking and Finance, with more than a decade of experience reporting on Nigeria’s financial system and broader economy. She closely tracks market movements, monetary policy decisions, company disclosures, regulatory actions, economic indicators, and global developments, and interprets what they mean for businesses, investors, policymakers, and households. Her reporting helps readers understand complex issues such as inflation trends, foreign exchange market dynamics, interest rate decisions, bank performance, and investment risks. She also covers major international events and periodically travels to Washington, D.C., to report on the World Bank/IMF Spring and Annual Meetings. Her dedication to financial journalism has earned her multiple recognitions and invitations to high-level professional development programmes. She is an alumna of the International Visitors Leadership Programme (IVLP) in the United States and holds an Advanced Financial Journalism Certificate from the Press Association Training in London, UK. Her other notable achievements include completing the Lagos Business School CMC Programme, the Bloomberg Media Africa Initiative Programme, and a Master Class in Journalism at Rhodes University in South Africa.