Uncertainty as dollar spending limit, suspension of virtual cards ground businesses in Nigeria

Uncertainty as dollar spending limit, suspension of virtual cards ground businesses in Nigeria

Nigeria’s commercial banks have announced a $20 monthly cap on overseas transactions made with naira debit cards.

It implies that Nigerians won’t be allowed to make any purchases totaling more than $20 in a single month using their naira debit cards. This is happening at a time when Nigeria, Africa’s largest economy and top oil exporter, is still suffering from a chronic lack of foreign currency despite the current spike in energy prices.

The United Bank of Africa (UBA), which informed consumers of the new limit of $20 in February, was the first to make the decision. “In keeping with our pledge to keep you updated on services, we have reassessed Naira Card restrictions for overseas transactions, and this will take effect on March 1st,,” the statement reads.

Some financial firms cooperate with international corporations to give virtual dollar cards, but at a black market cost, thus technology companies and Nigerians that deal with dollars in their company have chosen alternatives.

One of the businesses, Flutterwave, however, announced the suspension of Barter card, its virtual card service, citing “an update from our card partner” as the reason for the card service’s lengthy downtime.

The firm stated that “there is presently no timescale for resolution, but we would make sure to send you messages whenever this becomes available.” Many Nigerians who depend on this avenue for their dollar transactions are now on edge as a result of this.

Additionally, its substitute, Chipper Cash, does not offer dollar virtual cards to its new clients.

Starting on August 1, Standard Chartered Bank, a provider of international banking services, has likewise stopped allowing customers to use their debit cards to make purchases abroad.

In a letter to clients that was signed by the head of deposits, debit cards, and mortgages, the bank made this statement.

Although Nigerians can pay for online purchases with US dollar bills using their naira-denominated debit cards, every purchase is debited straight from their naira accounts at the current exchange rate.

Small digital companies and Nigerians who deal with the dollar are both uncertain. This is because virtual cards have been suspended and there is a dollar spending restriction. Businesses without a domestic account are subject to the rules and are unable to import goods or make purchases using local currency cards.

In an interview with DAILY POST, Lukman Ibrahim, the Chief Executive Officer of Halal Payments Network, a digital firm in Nigeria, said that the company’s cloud infrastructures, which comprise the App server for the company, are headquartered in the United States.

The corporation has been discouraged from paying the membership and it is having an impact on the business due to restrictions on dollar expenditure and the suspension of dollar virtual cards, which was the alternative.

The spending cap has prevented us from paying, which will undoubtedly have an impact on our business when we want to resubscribe in the upcoming month. This is the main difficulty we currently face. Since the majority of the cloud infrastructure we utilize and the API services that are priced are always in dollars, it will have a significant impact on us.

We are attempting to apply for a multi-currency Visa card; presumably, when it is approved, the spending limit will be between $1,000 and $3,000, compared to $20,000 for the local card.

Since we are currently utilizing virtual cards and the majority of businesses have already stopped their dollar cards, the situation is pitiful, especially considering that we conduct daily business in dollars, he stated.

Additionally, Emmanuel Olanite, a software developer and digital marketer, informed our reporter that because of this policy, he would not pay for domain names or the renewal of current domains and servers.

“Paying for numerous utilities online is challenging because of Nigeria’s prohibitions on dollar expenditure. Paying for domain purchases, new software purchases, and regular expenses are a few of these. Due to the restrictions, purchasing a device from an overseas website is also challenging. Hopefully the government or party in charge of putting this into effect will act soon to make payments for independent contractors and those working in the IT sector easier to obtain, he added.

The limitation has subsequently resulted in a restriction on additional subscriptions, which is really uncalled for, according to Afeez Winjobi, a creative designer working as a freelancer who has numerous memberships on various design resources platforms that need payment in dollars.

“My brand depends on these channels to provide clients with top-notch services. This regulation needs to be changed since it is negatively affecting our operations, he said.

Actions Nigerians should take

Johnson Chukwu, the CEO of Cowry Asset Management Limited, said that the policy is a component of the CBN’s efforts to manage the reserve. He claims that the program has “unintended negative repercussions on the typical customer when you purchase a few products that we are not making. The fact that Nigerians, even those who engage in imports, have challenges in international trade simply implies that we have been denied the chance we currently have to consume that product.

The decrease in oil output and export is the clear reason why we as a nation do not have enough money. These factors are therefore interconnected. The small items that Nigerians purchase from Jumia or any other international online retailer give us the impression that we cannot afford to purchase them again without a domiciliary account. What will also happen is that many people will open domiciliary accounts so they can have a dollar card issued in those accounts and conduct the necessary transactions.

Prof. Sheriffdeen Tella, an economics professor at Olabisi Onabanjo University, acknowledged that the dollar spending restriction on overseas transactions on local cards is hurting the economy but added that there isn’t much that can be done right now unless the nation’s reserves increase.

In regards to the policy, he stated that “the Central Bank might be able to detect that some people are playing games with it because they changed the law recently to make it difficult for people to withdraw or get foreign currency from the bank, which is definitely going to have effects on the businesses because the majority of businesses that are into dollars are really affected by the amount of transactions they can make.”

He asserted that “the truth is that stock firms were expected to have their domiciliary account; those who have a domiciliary account are still in business, but those who didn’t are the ones facing serious issues.

“Talking with the central bank and the administration about it’s openness is the only way to find a solution. However, since openness is a rarity in Nigeria, the Central Bank may have discovered that there are problems and that the best way to fix them is to invite those involved in the industry and ask how they can work together to go ahead. They will meet with the Central Bank if they have an association. The association should make an effort to meet with the Central Bank to discuss a solution and provide their side of the story, and the Central Bank will consider it as well.