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The CBN is at it again!! The Bankers Committee and the CBN at the completion of its Bankers Committee Meeting yesterday (which includes CBN and CEO’s of commercial Banks) has agreed to place spending limits for naira debit card holders who wish to use the cards outside the country. The Managing Director of Union Bank, Emeka Emuwa explains it this way;

Relating to the discussion around the stability of the exchange market, one of the areas we looked at was the use of the naira debit cards. 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, there was some arbitraging going on and so we moved to control the trend. What was agreed at the meeting was that the limits will be reduced for the use of the naira debit cards,”

What it means?

The CBN is essentially saying that because some people profit from the arbitraging that obtains when they use their debit cards abroad they now want to limit your ability to spend your own money legitimately abroad. By arbitraging a user of an ATM card could for example withdraw dollars in the UK or US via an eligible ATM machine. When he does that he withdraws at the interbank rate and them doesn’t spend the forex. He then travels to Nigeria and sells the dollars at the black market at a higher price.

How it affects you

It simply means for those of us who use our debit cards to shop abroad or pay for medical bills (if you had a baby or saw a GP), or do whatever it is that is legal with your money, you now have a spending cap that will be placed on your card and ability to spend from it.

This apparent U-turn puts a spanner into the works of banks who have for years advertised and lured depositors to spend their debit cards abroad even going as far as offering incentives such as cash backs.

It does feel like the CBN in its bid to control the depreciation of the naira has lost its mind by making utterances that suggest they have lost complete control of the forex market and the ability to defend the naira without capital controls.

 

4 COMMENTS

  1. The move is a good one, a lot of round tripping going on abroad. Some desperate individuals have made lot of cool margin from these activities.

  2. I think it suggests Nigerian banks are not doing real-time transactions online at efficient rates. The time difference between the spending on the debit cards and the ability of the banks to settle the debt with card companies should be seconds because they are debit cards, not credit cards.
    Welcome to third world technology.
    It’s unreasonable but a facet of our environment in Nigeria.

  3. this is one of the most stupid reasons in the history of nigeria to destroy the private sector and enforce hardship on well meaning nigerians. firstly, let me explain what the cbn is trying to say in simple terms: instead of killing the rat that is eating the garri in our nation’s store, cbn says let us stop buying garri.
    now if the average joe can get official rates via atm cards abroad for legal transactions, please tell me why would any nigerian buy forex from the black markets. this cbn poverty policy wants us to patronize the black markets they sell forex to since the banks will always claim they dont have.
    why not revise interest rates and other means to strengthen the private sector for economic growth
    why not limit the account of offenders instead of all to suffer by the actions of the few.
    nigerian banks stopped practising banking decades ago, they are glorified money lenders
    This country is run by educated fools

  4. Many people are saying this move is a good one stopping customers from a system that does not exist. I see it as a good one to stop banks from making outrageous profit.
    Taking this as an example, I had a friend use one of the Nigeria Bank Naira MasterCard in France (on ATM), he was charged N1,000.00 for using the card on the ATM and also, the exchange rate used for him was even higher than the black market rate.

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