According to reports, the new limit on bank clients’ dollar spending using their naira-denominated cards is putting a strain on Nigerian manufacturers.
Some banks recently declared that the monthly spending limit on naira debit cards would be reduced to $20 from $100, and that foreign transactions would be temporarily suspended.
Manufacturers in need of dollars to buy raw materials have been paying a high price on the black market or unofficial foreign currency market.
“I believe this development is based on CBN’s directive, which seems to be focusing on the demand side of foreign exchange management,” Taiwo Oyedele, head of tax and corporate advisory services at PwC, said.
According to him, the limitation would drive more legal requests into the black market, raising the rate and expanding the difference with the official rate.
“Given that even manufacturers source a significant percentage of their foreign exchange needs from the parallel market, this could further squeeze their margins while fuelling inflation,” Oyedele said.
The dollar is now trading at N587/$ on the parallel market, while the naira stayed steady at N417/$ on Wednesday in the official market, known as the Investors and Exporters (I&E) FX window.
Some firms have been driven to decrease production costs by decreasing the quality and quantity of goods produced, according to a manufacturer who spoke to journalists.
“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.
Ecobank, Zenith Bank, GTBank, and UBA are among the banks that have alerted their clients of a reduction in monthly spending limits or the temporary suspension of naira debit cards.
Customers’ monthly spending limits have reduced to $0 from over $4,000 seven years ago, thanks to some banks’ restriction of the use of naira-denominated debit cards for foreign transactions.
In April 2015, the expenditure limit for foreign transactions on naira-denominated cards was $50,000 per person per year, or $4,166.7 per month.
FSDH Research noted in a report that lower oil production, despite high crude oil prices, resulted in inadequate foreign currency inflows needed to bolster the country’s external reserves.
