“We cannot be certain whether Nigerians should celebrate or decry the recent decision by the Central Bank to reduce the existing annual limit on Naira debit cards, used abroad, from $150,000 to $50,000, per person.
Nonetheless, the enabling directive to commercial banks to this effect in the Apex Bank’s circular of 13 April 2015, may mean nothing to possibly over 98 percent of Nigerians who may never have the opportunity of travelling outside the country. So why would CBN, inspite of its dwindling reserves, choose to deliberately fund the often lavish consumption habits of a tiny minority of Nigerians.

It is intriguing that the earlier limit for Naira debit cards used abroad 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 upto $1.5m (N300m equivalent) in one trip abroad at the official exchange rate. 

Furthermore, such forex transactions can be serially repeated with new sets of ATM cards every month. Worse still, the cheaper dollars purchased with Naira debit cards abroad, may, ultimately, regrettably fund activities of terror groups and smugglers, whose activities may threaten security and destabilize local manufacturers, to challenge growth output and employment opportunities.

Indeed, with the prevailing climate of brazen corruption, it is inconceivable that CBN failed to foresee the possibility of an 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 the facility of Naira debit cards abroad!

Nonetheless, Emuwa’s 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 adverse consequences of the policy. The question nonetheless, is, how many Nigerians earn N10m annually or can afford $50,000 on international travel and shopping.  Surely, such forex profligacy is inconsistent with the subsisting dollar scarcity which has invariably pummeled the Naira exchange rate to challenge real sector growth and restrain job opportunites. 

It is inexplicable that under the earlier protocol, genuine travellers for business, holidays or studies, were required to submit authenticated documents with declared purpose, before the approval of allowances between $5,000 and $10,000. However, with CBN’s subsequent ‘laissez faire’ directive of September 26, 2013, personal forex procurement, for upto $150,000 at official rates with Naira debit cards abroad, invariably became much easier, without formal documentation nor declared purpose. It is unexpected that the release of forex for personal use is immediate even when forex provision to manufacturers for raw material imports could remain in suspense for several months.

Consequently, the clear evidence of gross 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 this 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 use of Naira debit cards 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. Indeed, who ever heard of the Bank of England funding the needs of the black market to prevent money laundering?”

The above is the summary of an article published in this column on 20th April, 2015 (See www.lesleba.com). Expectedly, the $50,000 limit on Naira debit cards abroad was also liberally abused. The present CBN Director, Banking Supervision, Tokunbo Martins, who spoke to the press after the 329th Bankers’ Committee meeting 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.” The inference from the preceding is that the host bank will be let-off and only the offending customer will simply lose further access to forex; it is arguable if this slap on the wrist sanction would effectively serve as deterrent to the public.

It is also rather disturbing that CBN did not anticipate that $50,000 revised limit set in April 2015, would be equally abused just as the earlier limit of $150,000; regrettably, sanctions have been so far, very rare, if any, despite the substantial level of infractions. Not surprisingly, therefore, the Regulator’s recent feeble threat, certainly did not cut ice with some commercial banks, who barely a week after Martins’ pleadings with the public, voluntarily suspended the use of Naira debit cards abroad to their customers. There are suggestions that with the prevailing acute dollar scarcity, the permitted bank commission of N5/$ on dollar withdrawals abroad often fell below the price at which banks procured dollars outside CBN auctions, whenever necessary, to settle rising debits on customers’ automatic dollar withdrawals abroad.

Unfortunately, with this development, the gap between the official and parallel market exchange rates would further widen as both genuine users, currency traffickers, round trippers, money launderers and smugglers would invariably increase forex demand in the black market to ultimately spike parallel exchange rates well beyond the present N450=$1 against the still wobbling N300=$1 from CBN auctions.
With the right connections, according to an insider’s recent public comment, in such market space, an exchange approval for $1m can earn a favored recipient over N150m instantly without a Kobo investment. Consequently, in order to reduce the market gap and the expectedly increasing appetite for foreign exchange arbitrage, the official Naira rate will inevitably see further devaluation. In other words, higher production cost, inflation and higher unemployment rates will also become inevitable as Naira exchange rate further plummets.