Many Nigerians who could make international payments from the comfort of their homes would now have to get a dollar card or visit the parallel market as the country’s largest banks cut dollar spending limits on naira cards.
Last month, the Central Bank of Nigeria announced it will stop dollar sales to the lenders to enable them to source for their dollars.
In response,
“$20/month spending limit on cards? This cannot even cover my Netflix subscription,” Yinka, a twitter user, lamented.
“A lot of subscriptions people do within $100 wouldn’t be possible anymore, and it means most people would have to get a dollar account and card before they can carry out international transactions,” Ayodeji Ebo, head of retail investment at Chapel Hill Denham.
Ebo said most people would now have to get dollars from the black market to make transactions.
Ayorinde Akinloye, a research analyst at United Capital, said the move would have a huge effect on individuals who might want to pay fees, buy items online and pay subscriptions using their naira debit card.
“The reason behind the lower spending limit by the bank is because when they do a projection into what their dollar cash flow would look like, and they see that there isn’t going to be a major improvement in the FX inflow into their coffers; they have to control demand,” he said.
According to him, the requirement for getting a dorm account and dorm card is more stressful which is why people would rather make use of their local account.
Zenith Bank announced on March 10 that it was temporarily suspending the usage of its naira card for international transactions and also cut spending limits for web transactions to $20 from $100 monthly.
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Guaranty Trust Bank Limited, in an email to customers on Friday, said it was reviewing the spending limit on the naira MasterCard for international online and PoS transactions to $20 monthly. That’s an 80 percent reduction from the previous limit of $100.
First Bank of Nigeria Limited has also set the limits on its naira Mastercard and naira credit card to $50 monthly. The United Bank of Africa Plc also set the limit on the naira Mastercard for international online to $20 monthly.
Since 2020, when oil price collapsed on the back of the pandemic, the apex bank has struggled to fulfil its dollar obligations to portfolio investors.
The International Monetary Fund estimates that the central bank has a backlog of $1.7 billion in unmet demand to investors.
Meanwhile, oil shot above $100 per barrel for the first time in years the day Russia invaded Ukraine, and has climbed sharply higher since. However, Nigeria has not been able to benefit from the rally as average oil production plunged to 1.3 million barrels per day (mbpd) in 2021 from 1.5mbpd in 2020. This is low, considering the country produced 2.5mbpd in 2011.
Despite the rally, Nigeria’s external reserves fell further by $175 million in February to $39.9 billion from $40.04 billion at the end of January.
Gbolahan Ologunro also pointed out it’s mostly individuals, and not really businesses, that would be affected, given the threshold on the value of transaction carried out daily.
“Looking at even SMEs, they would most probably deal with transactions of $500 which is above the initial limit of $100. So, the $100 limit applies to individuals than businesses,” he said.
Nigeria is reeling from sustained FX illiquidity, with repatriation-related demand largely undermined by unorthodox policy measures.
“In our view, Nigerian DMBs have switched to a more proactive mode, primarily geared towards controlling the pace of growth of their FX liabilities,” said analysts at CardinalStone Partners.
“This drive underscores the ubiquitous setting of new comfort levels for FX transactions that are likely to reduce the rapid accumulation of FX obligations and provide legroom for treating backlogs. The recent switch could also inadvertently protect the net FX positions of DMBs, leaving leeway for revaluation proceeds in the event of naira devaluation,” they added.
