Following orders from Central Bank of Nigeria that Banks should use existing interbank foreign exchange rate as the criteria for charging customers on all foreign currency denominated transactions; Banks choose to cease the use of naira debit cards outside the country.
Several Banks have thereto announced the suspension of online transactions based on foreign currencies as well as cash withdrawals at ATM’s and Point of Sale transactions using naira debit cards outside the country.
The Directive from CBN as speculated was for the introduction of a N5 profit margin as the official interbank rate on all forex transactions carried out using naira debit and credit cards.
This N5 profit margin on official interbank rate of N305 to the dollar is a major reason why banks choose to cease all foreign transactions on their payment cards, as adding N5 to whatever the inter bank market rate was at the time of transaction was not feasible considering dollar was scarce at the inter bank market and lenders had to source dollars most times at rates as high as N380 to run their card services
Hence rather than loosing so much with the CBN directive which must be complied with, Banks have decided to suspend all forex transactions on our naira debit cards.
However this decision has had a huge impact on intending travelers as they have faced tremendous difficulty in making online visa application payments with naira debit cards.
The CBN introduction of this strategy which has led to Banks’ suspension of forex transaction with naira debit card is probably its way of reducing the demand for dollar and expectation that it will bring down current exchange rate.
The CBN has consistently bemoaned the indiscriminate ways bank customers kept spending foreign currencies through their naira cards, despite the existence of a $50,000 annual forex limit on all naira debit cards. CBN has reiterated its intention to enforce this rule and any breach will lead to a ban from the nation’s forex market, it intends to monitor spending on all account through the Bank Verification Number as this links all activity on every account owned by a specific customer.
What is your opinion on the N5 profit margin introduced by CBN and the Banks decision to suspend foreign transaction on naira debit cards??
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