Naira/Dollar atm cards and inexplicable profligacy – Vanguard

dollar to naira

By Henry Boyo

ONE cannot be certain whether Nigerians should celebrate or decry the recent decision by the Central Bank to reduce the existing annual limit from $150,000 to $50,000, per person on usage of Naira/dollar debit cards abroad.

Nonetheless, the enabling directive to commercial banks in CBN’s circular of 13 April 2015, may mean nothing to possibly over 98% of Nigerians who may never have the opportunity of spending foreign currency abroad. So why would CBN choose to deliberately fund the often lavish consumption habits of a tiny minority of Nigerians. It is intriguing that the earlier limit for N/$ ATM debit cards was as high as $150,000. Pray, how many Nigerians earn N25m annually, and is it conceivable that such people would carelessly spend their total income on overseas travel and shopping expenses without regard to other essential living expenses?

Thus, it is more reasonable to conclude that with such liberal limits, CBN’s management may have consciously and deliberately left the door wide open to encourage and facilitate forex round tripping and capital flight for the rentier class and a tiny business elite. Indeed, a portfolio “businessman” with, say, 10 ATM cards obtained from multiple bank accounts could withdraw about $1.5m (N300m equivalent) in one trip abroad at official exchange rate.

Furthermore, such forex transactions can be serially repeated with new sets of ATM cards every month. Worse still, the dollars acquired at the lower official exchange rates, may, ultimately, regrettably fund activities of terror groups and smugglers, whose activities may threaten security and destabilize local manufacturers, to reduce both output and employment opportunities. Indeed, with the prevailing climate of brazen corruption, it is inconceivable that CBN failed to foresee the possibility of such extensive abuse of Naira debit cards abroad.

However, Union Bank’s CEO, Mr. Emeka Emuwa, recently laboured to explain at a press briefing that “we did find that in a number of cases, people were using the cards in a manner that they were not expected to use them, and there have been cases of arbitrage (forex round tripping). So, in order to sustain stability, the bankers’ committee agreed that the limit for the use of the Naira debit cards abroad should be reduced.”

Readers may note that, Emuwa, made no mention of any attempt to identify serial perpetrators or their sources of income, nor did he talk of sanctions imposed on those found culpable of gross misapplication of Naira debit cards abroad! Nonetheless, this observation of liberal abuse was obviously belated as the situation was already so bad, according to the Bankers’ committee spokesman, that the practice had become “a threat to the exchange rate stability of the Naira.” Nevertheless, the revised debit card limit of $50,000 seems a halfhearted attempt to reduce the consequences of the policy. The question nonetheless, is, how many Nigerians earn N10m annually after tax and sundry deductions and still spend $50,000 on international travel and shopping.

Surely, such forex profligacy is inconsistent with the subsisting dollar scarcity which has challenged the real sector, and restrained employment opportunities. It is inexplicable that under the earlier protocol, genuine travellers for business, holidays or further studies, were required to submit authenticated documents with declared purpose for approval of between $5,000 and $10,000. However, with CBN’s subsequent ‘laissez faire’ directive of September 26, 2013, personal forex procurement at official rates for upto $150k with debit cards, invariably became much easier, without formal documentation nor declared purpose, even when forex provision to manufacturers for raw material imports, remained in suspense for several months.

Consequently, the clear evidence of abuse of Naira debit cards abroad and our rapidly depleting reserves, should have compelled a proactive sense of responsibility to reduce personal dollar purchase limit to about $10,000/person/yearly.  There is no reason why separate applications cannot be submitted to banks, as in the past, with authenticated supporting documents for any legitimate, additional forex requirements above this sum.

Ironically, the earlier limit of $150,000 was an attempt, according to CBN’s circular of September 26, 2013, to address the derogatory impact of the “high volume of dollars imported by Nigerian banks, so as to prevent money laundering”. Paradoxically, the existing annual limit for Naira debit cards abroad, before CBN’s circular was just $40,000/person. It is surprising, therefore, that part of CBN’s strategy against capital flight and money laundering was an increase in ATM limit to $150,000 and the parallel authorisation for banks to sell $250,000 weekly, to about 2,000 registered Bureau de change. It is not clear how the CBN expected that this arrangement could restrain round tripping, money laundering or redeem the Naira exchange rate. The above is the summary of an article published in this column on 20th April, 2015.

Expectedly, the $50,000 limit on Naira debit cards abroad has also been liberally abused. The present CBN Director, Banking Supervision, Tokunbo Martins, who spoke to the press after a meeting with commercial bank executives in October 2016, noted as follows: “for a while, the policy has been abused by bank customers, and the CBN has not taken any step to that effect. We have decided to take the step now to enforce the rule. So we want the public to remember that the rule is in place… if people continue to breach that rule, they will lose access to the forex market.”

It is again rather disturbing that CBN did not anticipate that $50k revised limit set in April 2015, would be equally abused just as the earlier limit of $150,000; regrettably, sanctions have been so far, very rare, if any. Not surprisingly, however, the Regulator’s recent feeble threat, certainly did not cut ice with some commercial banks, who barely a week after Martins’ pleadings to the public, voluntarily suspended the use of Naira debit cards abroad to their customers.

There are suggestions that with the prevailing acute dollar scarcity, the permitted bank commission of N5/$ on dollar withdrawals abroad often fell below the price at which banks procured dollars outside CBN auctions, whenever necessary, to settle the rising debits on customers’ dollar withdrawals abroad. Unfortunately, with this development, the gap between official and parallel market exchange rates would further widen as both genuine users, currency round trippers and money launderers would invariably increase forex demand in the black market to ultimately spike official exchange rates well beyond the present N310=$1.

In order to reduce the market gap and the appetite for foreign exchange arbitrage, the official Naira rate will further worsen; in other words, higher production cost, inflation and higher unemployment rates will be inevitable as Naira exchange rate further plummets.

SAVE THE NAIRA, SAVE NIGERIA!!