The new limit placed on bank customers’ dollar spending through their naira-denominated cards is taking a toll on manufacturers in Nigeria, BusinessDay has learnt.
Some banks recently announced the reduction of the monthly spending limit on the naira debit cards to $20 from $100, while some temporarily suspended the usage of the cards for international transactions.
Manufacturers in need of dollars to import raw materials have been patronising the unofficial foreign exchange market or the black market at a high cost.
“I believe this development is based on CBN’s directive, which seems to be focusing on the demand side of foreign exchange management,” Taiwo Oyedele, head of tax and corporate advisory services at PwC, said.
He said the restriction would push more legitimate demands into the black market, thereby pushing up the rate and widening the gap compared to the official rate.
“Given that even manufacturers source a significant percentage of their foreign exchange needs from the parallel market, this could further squeeze their margins while fuelling inflation,” Oyedele said.
The cost of the dollar is currently at N587/$ at the parallel market, while at the official market, known as the Investors and Exporters (I&E) forex window, the naira remained unchanged at N417/$ on Wednesday.
A manufacturer told BusinessDay that some manufacturers had been forced to reduce the costs of production by reducing the quality and the quantity of goods produced.
“It is devastating. People are clamoring to get more dollars and you are cutting down. We go to the black market to source dollars to import, and it is expensive. It affects the cost of our production. It is cheaper when we source dollars from the banks. Like I said, it is devastating. It affects our turnover,” said Michael Iweka, CEO of Mackingdom Industries Co. Limited.
More banks are notifying their customers of the downward review of the monthly spending limit on naira-denominated cards.
“Due to current market realities on foreign exchange, we’ve reviewed cross-border transaction limits for the Naira Mastercard, Naira Credit Card, our virtual card and Visa Prepaid Naira card further to $20 monthly. This will take effect on 1 April 2022,” FirstBank of Nigeria said on Thursday.
“Also, international ATM withdrawals will not be allowed with our naira cards at this time. For increased transaction limits, please use your Visa Debit Multicurrency Card, Visa Prepaid (USD) Card and Visa Gold Credit Card to enjoy transaction limits up to $10,000 and other exciting benefits,” the bank said in a note to its customers.
Other banks that have also informed their customers of a reduction in monthly spending limit or temporal suspension of naira debit cards include Ecobank, Zenith Bank, GTBank, and UBA.
With the suspension by some banks of the usage of naira-denominated debit cards for international transactions, the monthly spending limit for customers has dropped to zero from over $4,000 seven years ago.
In April 2015, the spending limit on naira-denominated cards for international transactions was $50,000 per person per annum or $4,166.7 per month.
Lower oil production below the budgeted benchmark despite high crude oil price led to limited foreign currency inflows needed to boost the country’s external reserves, FSDH Research said in a report.