Forex scarcity: Banks limit dollar spending on naira debit cards

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 Cards.

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

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.

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

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.

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.

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