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Thursday, April 30, 2015

Mixed reactions trail limit on Naira debit cards

Mixed reactions trail limit on Naira debit cards

Bank customers are divided over the reduction in the amount of foreign exchange that can be accessed for overseas transactions through Naira debit/credit cards.

Two weeks ago, the Central Bank of Nigeria (CBN) reduced the limit on Naira debit card for overseas transactions to $50,000 per person per annum from $150,000. It also reduced the limit for daily withdrawal to $300 per day from $1,200 per day. The reduction is on Naira denominated MasterCard or Visa Card, linked to bank accounts in Nigeria. 

A cross section of bank customers who spoke to Financial Vanguard on the policy were however divided on the necessity and impact of the policy on the economy. While some criticised the reduction, saying it would hurt their businesses, others commended the reduction, saying it would help curb wastage of foreign exchange and corruption.

Criticising the new limit, Mr. Chiedu Igwe, an importer said, “The idea of reducing the debit card limit to $50,000 per person per annum is discomforting. I travel out often to get items for my trade and that aside; I spend money on vacations using a Naira debit card. So with this new limit on debit card, how am I going to keep up with my business and personal foreign exchange needs while I am overseas? I wish the implementation of the policy could be re-adjusted if possible to help businessmen like me.

Another businessman, “Mr. Lekan of LakeSide Clothing said, “I am not comfortable with the reduction, because I travel overseas to purchase most of what I sell in my stores. I make use of my debit card for shopping whenever I travel abroad, and I travel more than once in a year. So this new limit will disrupt my business plans.”

Corroborating these views, Mr. Umaru Hassan, a customer of Diamond Bank, Apapa, said that the reduction in limit is not good for business people, as most of them always travel abroad to purchase goods and conduct other business related activities that involves the use of money. “The idea of reducing the limit to $50,000 per person, per annum is an indirect way of reducing their ability to do business”, he said, adding that the CBN should reverse the policy.

On the contrary, veteran producer, director and actor, Prince Jide Kosoko commended the reduction, saying it would help curb the outrageous spending of many Nigerians. He said, “CBN has brought up the policy to redeem the value of the Naira. I know this will not go well with some Nigerians but the CBN has the power to do it. Many Nigerians travel abroad and spend their annual savings within one month in the name of holidays”.

Similarly, actress Ronke Ojo, commended the reduction saying it is another means of eradicating corruption. “It is obvious that electronic banking has generated some hiccups in the economy. However, the policy is a means to curb our excesses and eradicate corruption in the country,” she said.

According to Mr. Harrison Owoh, Chief Executive Officer, H.J Trust Bureau De Change, “The reduction in limit would minimise the various abuses associated with the use of Naira debit card overseas, like round tripping. He noted that some people use the card to withdraw dollars abroad at cheaper exchange rate, and then import the dollars and exchange them at higher exchange rate.

Banks commence implementation

Meanwhile, banks have commenced implementation of the reduction in limit on Naira debit card for overseas transactions by informing their customers about the new limits

For example, GTBank in an email message to its customers said, “We write to inform you of the Central Bank of Nigeria’s (CBN) decision to reduce the Foreign exchange spending limit on Naira MasterCard from $150,000 to $50,000 per annum.

This means that you can spend up to $50,000 in a year using your GTBank Naira MasterCard when abroad (shopping online at foreign stores, ATMs and POS). In addition, the daily cash withdrawal limit for the Naira MasterCard has also been reduced to $300 per day. Please see below the new limits for both spending using your Naira MasterCard and cash withdrawal abroad”.

Similarly, First City Monument Bank (FCMB), informed its customers via an email message saying, “Dear Customer, the new foreign exchange spending limits on your FCMB card is shown below. This means that when you are abroad, you can only spend up to $50,000 or its equivalent annually (shopping online at foreign stores, ATMs and POS). In addition, the daily cash withdrawal limit for FCMB cards have also been reduced to $300 or its equivalent per day.”

Limit not applicable to Domiciliary Accounts

Meanwhile, there are indications that the reduction in limit is being misinterpreted to include use of Naira debit cards for local transactions and, also debit cards linked to Domiciliary accounts.

Indications to this effect emerged from a circular issued by the CBN, Director of Trade and Exchange Department, Mr. Olalekan Gbadamosi. The circular titled, “Clarification on Circular of April 13, 2015. Re: Usage of Naira Denominated Cards Overseas, stated, “It has been observed that some sections of the public are giving different interpretations to the recent circular on the usage of Naira debit denominated debit cards overseas. It has therefore become necessary to provide the following clarifications:

For the avoidance of doubt, the circular refers to naira denominated cards (debit and credit) to be used overseas only. Debit/Credit cards used locally are not affected by this circular. Debit/Credit cards linked to customers’ Domiciliary Account to be used overseas are not also affected. Authorised dealers are to take note and bring this to the attention of their respective customers.”


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