BVN will check forex arbitrage – Sterling Bank

The Bank Verification Number (BVN) initiative, when fully implemented, will help to curb arbitrage in the foreign exchange market, according to Abubakar Suleiman, executive director, Sterling Bank.

Suleiman, who said this at an interactive session with the press in Lagos, said with the BVN, each bank customer will have a unique identification, which will make it easy to prevent people from flouting the Central Bank of Nigeria’s (CBN) recent policy on the use of naira denominated debit cards for transactions abroad.

The policy reduced the spending limit on the usage of the naira denominated debit cards for transactions abroad, from $150,000 per person annually to $50,000 per person annually. The daily cash withdrawal limit on the card was also fixed at $300 per person.

According to Emeka Emuwa, managing director/CEO, Union Bank of Nigeria plc, who first revealed that the Bankers’ Committee had agreed to reduce the limit on the usage of naira debit cards abroad, the decision was taken because of some cases of card abuse abroad impacting exchange rate stability.

“We did find that in a number of cases people were using the cards in a manner that they were not expected to use them and there have been cases of arbitrage. So, in order to sustain stability, what was agreed by the committee was that the limit for the use of the naira debit cards would be reduced,” Emuwa said.

However, despite the reduction in the spending limit on the usage of the naira denominated debit cards for transactions abroad, industry watchers argue that some bank customers could attempt to circumvent the policy by opening several bank accounts and using the naira debit cards they will be given to make withdrawals above the limit.

But, according to Suleiman, this will not be feasible when the BVN initiative is fully implemented, as each bank customer will have a BVN that will give him/her a unique identity that will be known to every player in the financial sector. Thus, when such a customer has reached the limit of his naira debit card spending abroad, he will not be able to use another card as the system will immediately recognise him.

The BVN, which is an initiative of the CBN and the Bankers’ Committee, was launched on February 14, 2014. It is a unique identifier for each bank customer across the financial industry, making it possible to build and track customer financial history and activity. This will allow banks access to more reliable information that could inform decisions on customer loan and credit applications and other complex transactions.

The initiative is expected to boost financial inclusion as those who have typically stayed away from mainstream banking due to low literacy levels will be able to open and access their bank accounts using their biometric information rather than traditional identification methods.

As part of efforts to encourage enrolment for the BVN, the CBN had directed banks to only honour transactions over N100million from customers with BVN from March 2015.

Such transactions, according to the central bank, include but not limited to, money transfers, loans, and contingencies, among others.

The CBN also urged all bank customers to register for their BVN by June 2015, warning that any bank customer without a BVN would be deemed to have inadequate Know-Your-Customers by that date.

Ade Shonubi, managing director, Nigeria Interbank Settlement System plc (NIBSS), said recently that bank customers who had done the mandatory biometric registration at any bank branch will soon start collecting their BVN cards as the cards were already with the banks awaiting collection by customers. Shonubi said bank customers would not be charged for the cards.

“We are giving the BVN cards out for free. The cost is borne by the Bankers’ Committee, which considers the whole biometric project very important. They have been bearing the cost; the cost of the cards, cost of almost everything else that has to do with the BVN.

“I have got my BVN card. I would encourage bank customers to talk to their banks as well. They have been printing them and sending them to the banks to distribute to the branches where you have enrolled, you would be sent an SMS. For those that have given email address, it would be sent to their emails,” Shonubi said.

 

HOPE MOSES-ASHIKE