Nigeria’s Forex Crisis: First Bank to Suspend International Transactions Using Naira Cards – Tekedia | Jewelry Dukan

Nigeria’s currency crisis is spiraling out of control, defeating the tough measures taken by the Central Bank of Nigeria (CBN) to deal with it.

The background can be seen not only in rising inflation rates, now 20.52%; it is also reflected in its importance in international transactions. The CBN has continued to limit the dollar amounts Nigerians can spend on international POS. But that, like every other initiative it has taken, hasn’t helped ease the FX crisis.

Banks are now completely running out of dollars, although earlier this year CBN stopped supplying currency exchange operators and opted to supply dollars to banks, which in turn sell direct to customers.

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First Bank of Nigeria has announced to its customers that it will suspend international transactions using its Naira Mastercard from September 30, an indication that the dollar shortage is nearing bottom.

First Bank said international transactions will not be available on its Naira debit card, credit card and Visa prepaid card.

“Due to the current FX market conditions, you can no longer use the Naira Mastercard, Naira Credit Card, our Virtual Card and Visa Prepaid Naira Card for international transactions. This will come into force on September 30, 2022.

“Please use your Visa Debit Multi-Currency Card, Visa Prepaid (USD) Card and Visa Gold Credit Card to continue transacting abroad with a limit of up to $10,000,” First Bank said.

First Bank is not the first financial institution in Nigeria to go this route. After the international spending limit for Naira cards was lowered from $100 to $20 per month in March, some financial institutions have gone further and shut down many of their international transaction services.

Following Standard Chartered Bank’s decision to suspend international transactions using its Naira visa debit card in July, other financial service providers such as Flutterwave, Eversend and other fintech platforms have also shut down virtual card services for international transactions.

Against this background, the naira was in free fall both in the official investor and export window as well as on the parallel market – around N435/$1 and N710/$1 were exchanged. The central bank has blamed Nigeria’s FX shortage on many factors, including market manipulation, while experts continue to point to poor dollar liquidity as the main cause.

Nigeria depends mainly on oil for foreign exchange, but has seen its oil export revenues plummet in recent years due to oil theft, missing refineries and fuel subsidies. Nigeria is spending the dollars it has earned from oil exports importing refined petroleum products, erasing what it should have used to build up its foreign exchange reserves.

With an insignificant volume of foreign exchange coming from non-oil exports, the CBN has counted on remittances from the diaspora to ease dollar shortages. Apex Bank has implemented a number of systems such as the naira 4 dollars and the RT200 scheme to encourage Nigerians in the diaspora to send money home.

Unfortunately, these plans failed to stem the raging crisis, and the fallout continues to mount. In June, the International Air Transport Association (AITA), expressed Concerns over Nigeria’s inability to repatriate US$450 million from foreign airlines. The development forced Emirate Airlines to announce the cessation of its operations in Nigeria, although it reversed the decision after the federal government released $265 million to pay foreign airlines.

Many Nigerian SMEs and individuals who rely on their debit and virtual cards to pay for products and services abroad are now finding difficult alternative means of payment.

The future doesn’t look rosy. The CBN has indicated that it plans to stop selling dollars to banks by the end of the year. The financial regulator said banks should generate foreign exchange from exporters if they want to sell importers.

“The era is coming to an end when because your clients need $100 million in foreign exchange or $200 million, now you want to go to CBN and pack all the dollars.

“It will end before or at the end of this year. We will tell them not to come back to the central bank for foreign exchange, but to make money off export earnings,” CBN Governor Godwin Emefiele said.

Experts have raised concerns that Nigeria could face a devastating rate of inflation if the CBN stops sending dollars to banks by the end of the year.

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