Nigeria: Relief for travellers as card suspensions lifted

With over $6bn injected into key segments of Nigeria’s foreign exchange market in six months, the economy is regaining its high dollar-liquidity status.


Moses Stephens, a Lagos-based entrepreneur was in London with his family in mid-July for a two-week vacation.

Some days later, he discovered that he had run out of cash. He tried to pay for some groceries purchased from a supermarket with his naira-denominated ATM card and was surprised when the transaction went through.

That would not have been possible a few months ago. However, since the beginning of July, Nigerian banks have raised their dollar spending limits on card transactions abroad by as much as 1,900%. Card transaction limits went from between zero to $100 monthly to as high as $500 to $2,000, depending on the level of dollar liquidity the bank enjoys. If Stephens had tried making a similar transactions anytime from September last year to June this year, the transaction would have failed, leaving him and his family cash-strapped.

Many banks, weighed down by acute dollar shortages caused by the drop in crude oil prices in the international market, had stopped their customers from using ATMs abroad, unless such cards were linked to dollar accounts funded locally. The banks also pegged monthly transactions on point of sale (PoS) and online transactions using cards at $100, £90, €130 and CD$360.

Restrictions on foreign spending lifted

On July 10, GTBank increased the monthly dollar spending limit on its naira MasterCard for international payments from $100 to $1,000, representing a 900% rise. Although the bank allowed customers to access the funds through PoS and other online channels, it restricted cash withdrawals from foreign ATMs.

On July 18, Fidelity Bank also raised the monthly spend limit on international transactions to $1,000. CEO Nnamdi Okonkwo said that his bank had lifted the restrictions on card transactions abroad following improved foreign exchange liquidity in the banking system based on the various economic recovery measures instituted by the Central Bank of Nigeria (CBN).

“We encourage customers to always insist on being billed in the currency of the county in which the purchases are made, especially PoS payments, in order to avoid attracting additional charges,” he added.

On July 19, UBA raised limits on its debit and prepaid naira cards from $100 to $2,000. Chukwuma Nweke, Executive Director, Operations and Technology at UBA said the raising of international card spending limits was in response to customers’ demand for higher limits and indication of rising confidence in the local economy.

The action, he explained, would make customers’ transactions abroad convenient and seamless.  “The policy shift allows our customers to make foreign payments on PoS and web and also withdraw cash from ATM subject to the current limit of $100 per day,” he said. FirstBank also raised limits on foreign transactions on naira cards to $1,100 monthly across ATMs, PoS, and online channels.

The bank’s limit on daily ATM withdrawals was raised to $300 for all countries except the United Arab Emirates and China, where it was pegged at $250 monthly for PoS and online transactions. Ecobank Nigeria also reviewed upwards daily spending limits for customers using its naira MasterCard for international payments on PoS and online channels from $100 to $1,000 for its platinum card customers.

Gold and standard card holders’ limits were set at $750 and $300 respectively. The bank equally enabled $100 daily ATM cash withdrawals on all the card variants. The bank expressed its commitment to supporting customers’ shopping needs abroad, adding that customers can also use their foreign currency denominated cards to enjoy limitless spending limits abroad.

Olakunle Ezun, Head of Treasuries at Ecobank Nigeria, said the increases on card spending limits across key banks would help travellers pay their hotel bills, make reservations and carry out other transactions using their debit cards. He said the CBN-sustained dollar interventions helped boost market liquidity which has been positive for the economy while reducing foreign currency pressure on banks.

Data from the CBN showed that it has committed over $6bn to key segments of the market in the last six months, a practice that has firmed the naira against the dollar. Some of the funds were channeled into settling demands for Personal Travel Allowances (PTA), Business Travel Allowances (BTA), medical needs and school fees payment abroad.

New FX window spurs foreign interest

Since its unveiling 0n April 24 the Investors’ and Exporters’ (I&E) FX Window has attracted over $4bn into the economy and boosted the naira’s stability – all of which helped local banks to adjust their card spending limits abroad.

“The Central Bank of Nigeria, in a continuing effort to deepen the foreign exchange market and accommodate all FX obligations, hereby announces a special window for investors, exporters,” said the CBN in a circular announcing the inception of the window. “The purpose of this window is to boost liquidity in the FX market and ensure timely execution and settlement for eligible transactions,” said the CBN

The I&E FX Window, also called ‘willing-buyer willing-seller window’, allows foreign investors to find buyers for their dollars at a mutually agreed price, with trading taking place by phone. The CBN controls about 15% of all the transactions carried out in the window.

The volume of transactions is increasing. Activity in the week ending July 7 saw a total of $407.40m traded, a 30.55% increase from the $312.06m recorded the previous week. Ezun said the era when banks were postponing settlement of dollar obligations were over as those obligations are matured and fully settled by the CBN.

He expects stability in the foreign exchange market to be sustained in the short to medium term as the CBN continues its intervention in the spot and forward markets and equally records continuous dollar inflows through the I&E FX Window.

Ike Chioke, Managing Director of  Afrinvest West Africa Limited, said the I&E FX Window is winning the confidence of foreign investors. He said the window is raising foreign investors’ appetite for Nigerian assets, leading to impressive appreciation in the equities market and stabilising the local currency, which exchanges at N306 to the dollar at the official market and N368 to dollar at the parallel market.

Upbeat performance in equities market

Ahmad Abdullahi, the CBN’s Director of Banking Supervision, said dollar inflows through the I&E FX Widow have led to upbeat performance in the Nigerian equities market. He said the CBN will continue to intervene in the market to boost dollar liquidity and support investment in the capital market.

Between January 4 and July 21, 2017, the Nigerian Stock Exchange, mirrored by the All-Share Index had appreciated by 26.6% to 34,020.37 basis points, while market capitalisation rose from N9.247 trillion ($27.9bn) to N11.7 trillion ($35.3bn). Investors remained optimistic of positive half-year corporate earnings which have begun to trickle in.

Analysts are optimistic that the upbeat market performance will persist in the near term as investor sentiment remains largely driven by strengthening macroeconomic fundamentals and foreign exchange management. However, Ezun believes that the gains seen in the equities market are just unfolding and that savvy investors will continue to take advantage of low prices of quoted stocks and make more investments to maximise returns.

He said: “As long as the I&E Window remains active, and the CBN continues to intervene in the forex market, the rally in the equities market will persist. There are concerns over the significant spread between interbank and the Nigerian Autonomous Foreign Exchange Rate Fixing (NAFEX) exchange rates”.

Razia Khan, Regional Head of Economics, Africa at Standard Chartered Bank, said the decision of the CBN’s Monetary Policy Committee  (MPC) at its July meeting to keep policy rate on hold at 14% through to the end of this year despite the drop in the inflation rate will support the NAFEX regime, especially with the pledge to cap Nigeria’s oil output at 1.8m b/d. 

“Given the policy choices open to the CBN, reaffirming its commitment to macroeconomic stability is the most pro-growth intervention that the CBN can make,” she said in an emailed note to investors commenting on the decisions of the MPC.

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