Many Nigerian banks are reducing how much foreign currency customers can spend abroad as concerns over the impact of the COVID-19 pandemic and drop in crude oil prices worsens Nigeria’s currency situation.
Guaranty Trust Bank Plc, the country’s biggest lender by market value, reduced international spending limits on its naira-denominated cards to $1,500 from $3,000 last week, while Zenith Bank Plc. reduced the limit to $1,000 from $3,000. Some media outlets report GTB reduced its limit to $500.
Also, Providus Bank, one of the more recent banking institutions also informed its customers that it will be restricting limits to $1,000 per month.
Just last week, the central bank “adjusted” the exchange rate between the naira and the US dollar from N307/$1 to N360/$1 at the official window while it moved the exchange rate for business travelers looking to buy forex from N360/$1 to N380/$1. This marked the first official devaluation of the naira since 2017.
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Why the restrictions: Analysts explain to Nairametrics that the recent devaluation or adjustment of the naira as the CBN will have it, could be the first round of currency depreciation expected in 2020. The exit of foreign portfolio investors from emerging markets like Nigeria is also expected to negatively impact the country’s external reserves.
Thus, banks may have decided to take precautions as the amount of dollars available for them to sell to their customers paying for transactions abroad may be declining.
The CBN is thought to have also restricted forex sales to BDCs following their requests further increasing dollar scarcity.
Nairametrics research also confirms the exchange rate at the parallel market is between N400 and N410 depending on who you are buying from and there is no guarantee that the seller actually has the dollar supply.
Blast from the past: This is not the first time the banks will be restricting dollar purchase for its customers.
In 2015 and 2016 when the oil price and output crashed, the central bank introduced controls to reduce dollar demand, prompting many lenders to either cut or suspend foreign payments for customers using their naira cards.
However, the measures taken then in 2016 came with damaging effects, as restricted access to dollars left businesses unable to import raw materials and locals unable to meet dollar-denominated expenses, including medical expenses and tuition at foreign schools.
Even while abroad, Nigerians still felt the brunt of the restrictions as banks placed spending limits on debit cards. The currency controls also had an adverse effect on investors as international airlines either pulled out or cut down on routes to Nigeria.