In 2020, the Federal Government of Nigeria through its central bank began to crack down on the use of naira debit cards for international transactions. The halt of using the naira cards came into full effect in 2022 when Banks like the Guaranty Trust Bank issued notices to their customers, informing them of the restriction.
Dear customer, we write to inform you that you will no longer be able to use your Naira Mastercard for international online and POS transactions effective 31st December 2022, GTB said at the time.
While GTB wasn’t the only bank to suspend this transaction type, it was the first Nigerian bank to do so, and soon after, Stanbic IBTC bank and First Bank followed suit.
The restriction on the Naira cards did not come suddenly, it was a long road to the anticipated ban. Before, users could spend up to $150,000 ($12,500 per month) annually on foreign purchases. However, this cap on naira cards for international transactions was reduced in April 2015 to $50,000 per person annually. The monthly limit was further reduced to $500 and subsequently $100. Then, in the first quarter of 2022, holders of naira cards were further restricted to $20 before it was followed by a total prohibition from international transactions in December.
The banks blamed the restriction on the sharp decline in oil prices at the time, and the attendant scarcity of forex after the Central Bank stopped selling forex.
After the ban, Nigerians had to seek alternatives, which gave rise to fintech companies like Chipper Cash, Grey Finance, who helped in facilitating payment services like shopping, and music streaming through their virtual dollar cards.
Almost a year later, the Central Bank has now recently lifted the ban on the use of naira cards on International platforms. Now, Nigerians can shop on Amazon, AliExpress, and subscribe to Netflix, Apple, Amazon and other international platforms.
Wema Bank has become the first commercial bank to lift the ban on its cards and increase the limit from $20 to $500 on its ALAT card.
President Bola Ahmed Tinubu has taken this action to improve the inflow of foreign exchange into the country since taking office, the CBN also floated the naira earlier in June, bringing the official and black market exchange values closer. With these, the Nigerian economy seems to be headed towards a better direction and this latest policy could lead to a better FX inflow for the country.
While Wema Bank has been the only bank to have removed the limitations on foreign transactions, it is anticipated that other commercial banks would do the same in the coming weeks. However, the lifting of the ban does not guarantee that Nigerians will carry on with using those international services as many have less financial capacity than they did before the ban came into effect. According to the Nigerian Bureau of Statistics, more than half of Nigerians are living in multi-dimensional poverty which means they can’t afford more than a dollar per day, making the ban reversal something of a mirage.