naira-DollarBanks can issue Naira or Dollar denominated debit or credit cards to customers and such cards could be linked to the current or savings account of the customer
with the bank. The purpose of these cards is to allow the customers spend from their Naira account whenever they travel abroad. The Central Bank of Nigeria (CBN) however, stipulates a maximum limit of $150,000 per year for each card holder.
Financial Vanguard investigations, however, revealed that bank customers are now using multiple
accounts either in the same bank or in different banks to circumvent this limit.
Investigations reveal that bank customers now obtain a naira MasterCard or Visa card linked to different accounts so as to be able to access dollars above the $150,000 limit. Further investigations also revealed that banks are not only aware of this practice but encourage it. A top foreign exchange dealer who spoke to Financial Vanguard on condition of anonymity said the banks encourage it because it enables them make more money through the charges deducted when customers use such cards for dollar-denominated transactions or withdraw dollars while outside the country. The dealer also told Financial Vanguard that the practice is prevalent among banks in the country.
Though the CBN Director of Corporate Communications, Ibrahim Mu’azu did not respond to enquiries on the response of the apex bank to this malpractice, a top management staff of the bank, however, confirmed to Vanguard that the apex bank was indeed aware of this malpractice. Speaking under condition of strict anonymity, he said: “We are aware of it and I can tell you it is a breach of regulation.
But we are not doing anything about it for now because of the challenge of tracing individuals with multiple bank accounts in the industry. But I can assure you this is one of the problems that would be addressed with the Biometric Verification Number (BVN). Once we complete the project and every bank customer has a BVN, it would be easy to trace those who have multiple accounts and also monitor what they are using the accounts to do.”
The driving factors
Vanguard investigation revealed that this malpractice is being fuelled by a number of factors chiefly the increasing difficulty to access dollars due to increased restrictions on foreign exchange by the CBN as well as dearth of supply of dollars in the interbank and parallel market.
For example, it is easier to access dollars from your naira debit card – be it MasterCard or Visa while outside the country, than to source the dollars from banks or the parallel market for the purposes of travelling with physical cash. Furthermore, some of the bank customers engaged in the malpractice do so because the dollar requirement for their business is well above the maximum prescribed by the apex bank, or because their business does not qualify or cannot meet the documentation required to access foreign exchange from the interbank market.
Investigations, however, also revealed that some customers that engage in this malpractice do so for the purpose of round tripping i.e. withdrawing dollars abroad, and bringing it into Nigeria to sell in the parallel market. Given that the exchange rate applied for dollar withdrawal through the cards is usually lower than what obtains in the local parallel market, the customers enjoy a margin of N15 to N20 on each dollar imported into the country through this malpractice.
What the law says
The CBN guidelines for card issuance and usage in Nigeria states that, “Cards may be issued in Nigerian Naira or in any other convertible currency.
The international usage limits and frequencies for Naira denominated cards shall be defined by each participating bank.
However, these limits shall not exceed the total combined amount of foreign currency that each individual can access via Business Travel Allowance (BTA) and Personal Travel Allowance (PTA) per annum – which is currently $150,000 per annum.
Issuers shall give customers the opportunity to request for cards within the range of the bank’s card products. For instance, if an issuer offers brand of cards such as Verve, Visa, MasterCard, Union Pay, etc, customers shall be free to choose any brand of cards issued. The available cards provided by the issuer must be explicitly stated on the card request form (physical or electronic) so that the customer can make an informed choice.
Issuers shall also provide customers with a choice to specify limits for the volume and value of transactions that they would perform; such limits cannot be higher than the maximum limits, as specified in this Guideline.
Issuers shall provide customers with the ability to specify when their cards should work abroad, and when it should not, as well as which countries they would like their cards to work in, at any particular time.
It is the responsibility of the issuing bank to work with the card schemes in providing the settlement and clearing facility for cards used outside Nigeria.”
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