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Banks reduce dollar spending limit on naira debit cards to $100 

Some banks have reduced their monthly spending limits to as low as $100. 

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Banks reduce dollar spending limit on naira debit cards to $100 

Nigerian banks are sending notices to customers about a reduction in the spending limits for their naira denominated debit cards used for paying for transactions abroad. Most of the messages relate to debit cards powered by Master Card. 

One of such notices seen by Nairametrics reads: “Dear Customer effective 16 August 2020, your Naira Mastercard International will be reduced from $500 to $300 monthly.” 

Note that some  bank have also reduced their monthly spending limits to as low as $100. 

READ MORE: Pay-as-you-view: Startimes, Multichoice in a tussle for the Nigerian market

Nigerians rely on their debit cards to pay for online transactions that are billed in US dollars. The banks debit their naira account with the prevailing exchange rate.  

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Nigeria is experiencing currency shortages as official forex sales to the BDC segment remain suspended.

Forex transactions in the I&E Window has plummeted to under $1 billion monthly. The parallel market has been the go-to market for price guidance and transaction for companies looking to sell at a price higher than the official market rate.  

What this means: Limits to debit cards have been synonymous with forex scarcity, with the 2016 being most recent. The lower the forex available to banks, the more difficult it is for them to meet their dollar commitments, particularly for debit card usage.  

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Forex liquidity within the banking sector has been largely impacted by reduction in foreign remittances from Nigerians in diaspora due to the COVID-19 lockdown. Persistent dollar scarcity could lead to further reduction in spending limits, except the CBN intervenes.  

Chike Olisah is a graduate of accountancy with over 15 years working experience in the financial service sector. He has worked in research and marketing departments of three top commercial banks. Chike is a senior member of the Nairametrics Editorial Team. You may contact him via his email- [email protected]

1 Comment

1 Comment

  1. Raymond

    September 2, 2020 at 9:56 pm

    Please sir…I would like to know if the resumption of dollar sales to BDC would increase banks international spending limit

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Economy & Politics

CBN reduces MPR from 12.5% to 11.5%

The Governor of the CBN has announced the reduction of MPR from 12.5% to 11.5%.

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CBN Vs NESG: Waving the white flag for the benefit of Nigerians, Exchange Rate Unification: CBN devalues official rate to N380/$1, Nigerian banks have written off N1.9 trillion impaired loans in past 4 years, CBN sandbox operations, Stirling Trust Company Limited

The Monetary Policy Committee (MPC), of the Central Bank of Nigeria (CBN), has voted to reduce the Monetary Policy Rate (MPR), from 12.5% to 11.5%. This was disclosed by Governor, CBN, Godwin Emefiele, while reading the communique at the end of the MPC meeting on Tuesday.

READ: This is a copy of the Self-Certification form govt. wants targeted account holders to fill

The committee retained CRR at 27.5%, stating that the recent inflationary pressures is not driven by monetary policies, rather as a result of structural policies.

Highlights of the Committee’s decision

  • Reduce the MPR by 100 basis points, from 12.5% to 11.5%
  • Adjust asymmetric corridor, from +200/-500 to +100/-700 basis points around the MPR
  • Retain CRR at 27.5%
  • Retain liquidity ratio at 30%

Explore the Nairametrics Research Website for Economic and Financial Data

According to Emefiele, the Committee reviewed the choices before it, bearing in mind its primary mandate of price stability, and the need to support the recovery of output growth. Consequently, the Committee noted that the likely action aimed to address the rise in domestic prices would have been to tighten the stance of policy, as this will not only moderate the upward pressure on prices, but will also attract fresh capital into the economy, and improve the level of the external reserves.

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The Committee however, noted that this decision may stifle the recovery of output growth, and drive the economy further into contraction.

On easing the stance of policy

The MPC was of the view that this action would provide cheaper credit to improve aggregate demand, stimulate production, reduce unemployment, and support the recovery of output growth.

In addition, the Committee noted the tendency of an asymmetric response to downward price adjustments by ‘Other Depository Corporations’, thus undermining the overall beneficial impact of a reduction, to the cost of capital.

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After all considerations, members were of the opinion that the option to loose will complement the Bank’s commitment to sustain the trajectory of the economic recovery, and reduce the negative impact of COVID-19.
He also stated that, liquidity injections are expected to stimulate credit expansion to the critically impacted sectors of the economy, and offer impetus for output growth and economic recovery.

Based on the foregoing, the Committee decided to reduce the MPR by 100 basis points to 11.5% and adjust the asymmetric corridor to +100/-700 around the MPR.

MPC projects economic growth

Recall, that the Nigerian economy contracted by 6.1% (year-on-year) in the second quarter of the year, as a result of the disruptions caused by the COVID-19 pandemic. The MPC however, projects a positive growth in the last quarter or at least Q1 2021.

“With a persistent focus on activities meant to reverse the contraction, the MPC projects growth at positive levels in Q4 2020, or latest by Q1 2021, based on the anticipated positive results from the coordinated and sustained interventions by both the monetary and fiscal authorities.”

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Financial Services

CBN grants Greenwich Trust Limited operational license for merchant banking

CBN has upscaled Greenwich Trust Limited to the status of a merchant bank.

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CBN grants Greenwich Trust Limited operational license for merchant banking, NSE Market Data, NSE records total transactions of N121.99 billion in August , 2019 events in the Nigerian capital market and outlook for 2020, Why you might need a capital market lawyer

The Central Bank of Nigeria (CBN) has upscaled Greenwich Trust Limited and granted it, operational license for merchant banking in the country.

According to an official statement released by the firm, the entity would be known as Greenwich Merchant Bank Limited. This license allows Greenwich Merchant Bank to upscale and offer such diverse services as corporate banking, investment banking, financial advisory services, securities dealing, treasury wealth and asset management, etc., making it possible to provide increased value to stakeholders beyond its previous scope.

Explore the Nairametrics Research Website for Economic and Financial Data

Recall that the minimum capital requirements for establishing a merchant bank according to Merchant Banking Licensing Regulations in 2010 are N15 billion

(READ MORE: CBN debits banks N216.1 billion for CRR compliance)

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With the addition of Greenwich Merchant Bank, Nigeria now has six merchant banks. The others are; FBN Quest, Coronation Merchant Bank, DSH Merchant Bank, Nova Merchant Bank and Rand Merchant Bank.

About Greenwich Trust Limited

Greenwich Trust Limited is an investment banking firm duly registered with relevant authorities such as the Nigerian Securities and Exchange Commission (SEC). It is a diversified firm with subsidiaries such as Asset management, GTL Properties, GTL Securities Limited, Cedar Express Limited and Meyer Plc.

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Financial Services

AIICO Insurance to boost property, technology with proceeds from right issue

Right issue will increase the capital base of the firm from N11.6 billion to N15.1 billion.

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FCMB Pensions, AIICO Insurance Plc to Offer Right Issue Of ordinary shares worth N3.5 billion

AIICO Insurance Plc, to invest the proceeds of its on-going right issue on its property, plant, equipment and technology.

While 61.2% of the proceeds are planned to be invested in property, plant and equipment to be completed Q4 2024, 38.8% are expected to be invested in technology to ne completed Q2 2023.

This was disclosed by Chief Executive Officer, AIICO Insurance Plc, Mr. Babatunde Fajemirokun during a virtual Facts Behind the Issue on Friday.

According to him, the issue, which is between September 2, 2020, and October 7, 2020, worth a total of N3.5 billion, will be offered on the basis of 5 new ordinary shares for every 13 ordinary shares held at the close of business on Monday 15th June, 2020. 

On the rationale for the right issue, Fajemirokun, remarked that NAICOM increased the regulatory capital requirements for the insurance industry, increasing the composite players to the tune of N18 billion by 2021.

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He said, “If successfully implemented, the right issue will increase the capital base of the firm from N11.6 billion to N15.1 billion.”

He also expressed intent in capitalizing some of the firm’s retained earnings. 

Speaking further, Fajemirokun remarked that the offering of the right issue will ensure networking and infrastructural upgrade, while empowering the firm to underwrite big-ticket transactions, especially in oil and gas industries.

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Key highlights 

  • The right issue size is worth N3,486,216,763.20 
  • The number of shares is 4,357,770,954 
  • The price is N0.80 (representing a discount of 25.2% as of the qualification date)
  • 5 new shares will be issued for every 13 shares held as of C.O.B, June 15th, 2020
  • The issue period will be between September 2, 2020 and October 7, 2020 
  • 61.2% of the proceeds from the right issue will be invested in Property, Plant and equipment to be completed by Q4, 2024 
  • 38.8% of the proceeds from the right issue will be invested in technology, to be completed by Q2, 2023 

Over the years, AIICO has evolved from an insurance agency to a leading diversified non-banking financial institution in Nigeria providing life, health and general insurance, as well as investment management.

 About AIICO Insurance Plc 

AIICO Insurance Plc was established in 1963 with a large Life and Non-life business, and complimentary focus on Asset Management, Health and Pension. Its market capitalization pre-issue is N9,064,163,584.00.

In 2019, AIICO Insurance Plc recorded 78% revenue from the Life business, 17% from Non-life business. On profit side, Life business contributed 91%, Asset Management contributed about 9%. It currently has 22 branches and 3 retail outlets across the federation. 

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