[url][/url]http://qz.com/581088/why-nigerians-cant-use-their-bank-debit-cards-outside-the-country-anymore/?utm_source=YPL

The story of how Nigeria’s then Central Bank governor Sanusi Lamido Sanusi, in August 2009, shook up the local banking establishment is well told. He bailed out five banks and dismissed their chief executives and introduced reforms like capping the duration a bank boss could stay in office to ten years.
But something else happened as a result of his intervention—the centre of gravity of retail banking in Nigeria quietly shifted. The sudden realization that some of Nigeria’s banks were effectively insolvent triggered a kind of flight to safety. The banks which were untouched by ‘Hurricane Sanusi’ became very safe in the eyes of customers.
The most upwardly mobile and footloose Nigerians bank with names like GTBank, StanbicIBTC, First Bank, Diamond Bank and Access Bank these days. They go on holidays to Dubai, shop in London and take their kids to Disney World in Florida now and again. Unlike, say, the UK where the idea of travel money is cultural, Nigerians over the years have come to rely on their debit cards anytime they are outside Nigeria. The exchange rates are generally decent so as long as you have naira in your linked account,it’s always more convenient to pay for things in Debenhams with your bank card.
There’s also the coterie of Nigerians who run a variety of web-based businesses that require them to pay for things like server space and web hosting in Europe or America on an ongoing basis. Many of these people use their debit cards to make payments online.

This is all well and good when it works but right now all the major banks are dealing with the same problem at the moment.
Nigeria is running against strong economic headwinds right now with oil prices below $40 and foreign reserves below $30 billion—enough to pay for maybe six months of imports at most. The Central Bank governor, Godwin Emefiele, has introduced ‘demand management’ in response to the challenges he’s faced with. In practice, this means stifling demand for foreign exchange by declaring certain imports unworthy of expending Nigeria’s precious foreign reserves.

Certain things have been discouraged from importation with the country’s foreign reserves—toothpicks, some types of steel, wheelbarrows, even Indian incense. This is effectively a ban if the importer doesn’t already have their own foreign currency in banks abroad or under a pillow somewhere. This has been accompanied by nationalist rhetoric about how Nigeria shouldn’t be importing things it can produce. If you can’t access foreign currency through official channels, you are left with no choice but to use the black market at much higher rates. At times, it does feel like the Central Bank is determined to burn down the village in a bid to save it.
International nightmare

So what does this have to do with the retail banks named above? They have been hit hard by the demand management policy. Buying dollars from the Central Bank to settle international payments for their customers is a nightmare these days. The banks typically don’t have many customers who export—mirroring the wider Nigerian economy which depends on oil for the vast majority of its forex earnings.
All of a sudden, having so many upwardly mobile and jet setting customers is not that much fun anymore for the banks. Almost on a daily basis, people have been getting emails from their banks telling them the daily or monthly or annual limit dollar spend on their debit cards have been adjusted—almost always downwards.

Free floating naira?

What to do? There are no easy answers. But it surely must be counterproductive to arbitrarily shutdown legitimate economic activity in the name of demand management. The more these restrictions go on, the more they open up gaps for corruption to flourish and for the well connected to game the system. History teaches us this – from Venezuela to Argentina where the new president, Mauricio Macri, is now drawing 12 years of ‘El Cepo’ to a close.

Nigeria has to earn its keep in other ways by producing things that other countries want that are not crude oil. This is obvious enough but by no means easy—infrastructure is terrible to non-existent and productivity will take time to build up. It is tempting to pray for oil prices to rise again to give the country some breathing space but it is more likely that the country will simply return to its old spendthrift ways.
Should foreign exchange be made available to people who simply want to go shopping and enjoy themselves in Dubai at a time when it is scarce? Asking questions like this leads to all sorts of dangerous places. What exactly is legitimate demand? How do you curb ‘illegitimate’ demand without hurting people who are genuinely trying to run their business?
The only answer to this is pricing. Freely floating the naira will allow the market determine what is the real value of the currency. But the political appetite for such a policy move is exactly zero. Politicians are just not going to accept that the currency is something they have no control over.
I fear that things may be this way for a while yet. And the longer it goes on, the more damage it will do to the economy and ordinary Nigerians. Will it be worth it?

Nice write up

Oga ooooo

I wish I could read this. But the post is too long

Nice write up