Indications have emerged on why banks stopped the usage of naira debit and credit cards outside the country. According to industry sources, the decision was reached because banks could no longer provide foreign exchange to settle the foreign transactions.
It was gathered that in the past three months, over $300 million was spent paying for transactions that were done abroad using naira cards. This is aside the business travel allowance, personal travel allowance and payments for ‘eligible for foreign exchange’ products and services.
Some banks had last week informed their customers that with effect from Friday, January 1, 2016, they would no longer be able to access funds from their accounts using naira debit or credit cards outside the country.
This had spiked reactions on social media as Nigerians, especially those living and schooling abroad condemned the move.
However, a banking industry source explained that “For the last two to three months we spent over $200 million to $300 million dollars paying for naira cards.
“People carry 10 cards, travel and withdraw cash and they use these dollars to buy gold, air freshener, candle and other things in five to 10 suit cases, what they forget is that the money they spend is our reserves.
“The result is that we are unable to pay the owners of the card, MasterCard and Visacard because there is not enough foreign exchange to allot to them and if you don’t pay them you have a country risk and credibility issues for the country” the source elaborated.
The unofficial value of the Nigerian currency, the naira, has plunged because of the fall in the oil price which is its main export, as the country has so far spent billions of dollars propping up the currency since it fixed the exchange rate in February and tightened trading rules to curb speculation.
The nation’s foreign exchange reserves had continued to decline falling to $29.34 billion as at December 22, 2015 according to figures on the website of the central Bank of Nigeria (CBN).
Meanwhile, the CBN has denied giving the directive on the stoppage of naira credit and debit cards use outside the country to banks. Although the ban has been said to be personal decisions of the banks, insider sources within the apex bank said the decision has received the support of the central bank which has taken several steps to reduce dollar outflow.
In June, the central bank had banned businesses from accessing hard currency to import about 40 items. The list included Indian incense, toothpicks, plastic and rubber products, soap and even private jets. The amount that Nigerians could spend on credit cards abroad had already been reduced by the banks.