CBN in Stringent Surveillance of Bank Customers’ Naira-denominated Card Usage

• Ecobank, FirstBank, FCMB restrict usage to priority customers

By Obinna Chima

The Central Bank of Nigeria (CBN) yesterday disclosed that it was closely monitoring the usage of naira-denominated cards for international transactions by bank customers, following the recent increase in the monthly spending limit announced by several commercial banks.

This is just as it emerged that some banks like Ecobank Nigeria, FirstBank of Nigeria Limited and First City Monument Bank (FCMB) have decided to either restrict the increase to only their “priority” customers, or revert to the $100 monthly spending limit till further notice.

A top central bank official who spoke to THISDAY, pointed out that even though the banks did not get approval from the CBN before making the announcement increasing the monthly spending limits on the naira cards, the CBN has decided to continue to monitor activities in that segment of the market so as not to erode the gains recorded in the foreign exchange market.

“Even though we (CBN) didn’t give them approval before they made the announcements, we would not withhold the approval. But we felt they needed our approval before such announcement.

“But we will not withhold it because we know it was meant to support the market. We would continue to monitor activities in that market closely. We want to gauge the size of these transactions before we know what to do.

“What we are trying to do is to make sure that those that use those cards really need it and not for people to speculate with it,” the top central bank official, who did not want to be named, explained.

Some banks have restricted the hike on the monthly spending limit on their naira cards for the settlement of international transaction, to only their “priority” or “high net worth” customers, THISDAY has learnt.

While in some instances, some banks have reverted to the monthly spending threshold of $100 a month.

This might not be unconnected to a circular issued by the CBN to the lenders shortly after they had alerted their customers last month of the hike in the monthly spending limit on naira-denominated cards on international transactions.

In the circular, the CBN was reported to have cautioned the banks not to overheat the FX market.

A banking source disclosed that once the lenders got the circular from the CBN, some decided to exercise restraint and have so far restricted the monthly increase on naira-denominated cards to their priority customers, while others reverted to the previous spending threshold of $100 a month.

For instance, Ecobank increased the daily spending limit on its naira-denominated MasterCard for international transactions from $100 to $1000, for only its platinum card customers for online transactions.

It also set $750 and $300 limits for its gold and standard cardholders, respectively.

However, FirstBank, which raised its spending limit to $1,100 monthly, reversed itself immediately it got the circular from the CBN.

However, Diamond Bank Plc chose not to raise the spending limit, as it continues to monitor situation in that segment of the market. Instead, it has been encouraging its customers to get dollar-denominated cards.

In the case of FCMB, regular bank customers who have tried to use their naira cards abroad could not do so.

Last year, Nigerian banks reduced, and in some cases, suspended FX transactions on their naira cards (debit and credit) in the face of acute dollar shortage brought on by shrinking FX earnings, a tightening in FX policies by the CBN, and reduced portfolio inflows.

But in a move that signalled improved FX liquidity in the banking system, several banks last month raised the monthly spending limit on their naira MasterCard by as much as 900 per cent to US$1,000 from US$100.

But some of the banks were silent on the category of customers that could benefit from this service.

It was observed that when the banks announced the opening up of their cards for international transactions by raising the limit, the rate of the naira on the Nigeria Autonomous Foreign Exchange (NAFEX) market, otherwise known as the Investors’ and Exporters’ (I&E) window, fell from N363 to a dollar to N379 to a dollar within days, leading to concern at the CBN.

The impression at that time was that the banks were buying FX from the NAFEX to fund the naira-denominated cards.

The I&E window, where buyers and sellers are free to agree to an exchange rate, was introduced in April to attract foreign investors and boost the supply of dollars in the country.

“The new investors’ and exporters’ FX window has provided impetus to portfolio inflows, helped increase reserves above $30 billion, and contributed to reducing the parallel market premium,” the International Monetary Fund (IMF) acknowledged in a report recently.