"WHY BANKS RESTRICT USE OF CARDS ABROAD"

A BRIEF HISTORY

Approximately a decade ago since the advent of debit cards and subsequently cards with international brands in Nigeria popularly the Master & Visa Cards that are (Euro Master Visa) EMV compliant. Nigerians have found it easy to make transactions internationally. Great services provided by the banks.

HOW DOES IT WORK?

When as a customer, you transact with your cards on foreign sites whether home or abroad you are been billed according to the local currency configuration. Most websites also have options of changing to the universally accepted currency- Pound, Euro, and Dollar.

When you travel abroad, you can dispense the country’s cash via Automated Teller Machine (ATM) or alternatively use a Point of Sales (POS) machine to pay for goods & services.

As a customer you are happy having access to your Naira account while abroad or transacting on foreign websites. In all, your Naira account would be debited for the equivalent value with Dollar being the standard currency for all exchange to pass through. This service comes with a charge and that’s the spread to be shared by the companies making it feasible for you to have access to your money in whatever currency.

WHAT MOST CUSTOMERS DON'T KNOW

1. Any customer that uses a bank’s card for other currency dominated transactions. The bank would make settlement in dollars (only acceptable currency for settlement) to balance it’s books.

2. The CBN provides banks with the dollars for settlement of international transactions.

3. The availability of dollars in CBN’s reserve is directly proportional to the amount banks can access which in turn would determine the limit every card can access.

4. CBN’s dollar vault is largely dependent on the crude oil price as it is the major source of the country’s Dollar supplies.

5. Since the last administration did not save during the oil boom, the current card restrictions on international transactions is one of many prices citizens would have to pay for that government’s mismanagement of the treasury.

THE CURRENT SITUATION

What every customer wants is service. They do not care how you provide it. Just do not bug them with your internal processes. Just give them what they want. Period.
Well, in this case the banks’ hands are tied and it is out of their control. What is currently happening to the limits on our cards is largely caused by the availability of dollars by the CBN. The CBN itself have a threshold of available dollars (free dollars) set aside to consummate invisible trades and service card dominated foreign transactions. 
We all know the crude oil price is currently at an average price of $30/b and more predictions indicate it will fall below $20/b. What this means to our treasury and dollar availability is that it will keep dwindling unless the economy is diversified and export increased.

The Nigerian economy is largely oil dependent and the reason why we are faced with the current situation is this crude oil price. The CBN would only prioritise on the limited available dollars to fund majorly visible trades and some part of invisible trade (e.g. school fees, medical bills).
The bank itself would only set a limit to the tune of available dollars set aside to settle foreign dominated transactions. The very reason why banks are saying you can only access $100 per day not exceeding $1000 per month – though varies from bank to bank and also, card variants.

As you can see, the way to get out of this mess is when the country diversify it’s economy to receive more dollars through export of it’s goods and services to match up with what the oil can give us or we pray, the usual Nigerian way, for crude oil to rise up in order to build our reserve. The pains of mono-economy.

THINGS TO NOTE

The card is an easier and cheaper way for us all to transact, very convenient but not the only way. We have Western Union, MoneyGram with small limit as well. You can liaise with local Bureau De Change (BDC) to receive equivalent currency in popular cities like Dubai, London, NewYork, etc. the list is not exhaustive. For this (BDC), one would pay more. Just enquire. I recently got someone to receive 600Dirhams from an agent while I pay Naira here through a BDC agent.

Even when the oil price was good, above $100/b, there were limits set on the debit cards simply to check mate round-tripping and fraud. But limits then were enough to settle customers’ need per day. The banks are currently not happy about the situation but have no choice.

The director of Monetary Policy of CBN: “Mr. Moses Tule indicated that the policy would not be reviewed any time in the short term, as according to him, the reserves which currently stand at about $29 billion would have to be built up to a figure of around $50 billion before free use of the foreign exchange could be restored”
Hopefully, the 2016 budget proposal, if passed into law, would solve this puzzle.

-The writer is on twitter @momudee

Thank you for the explanation,does this mean I can still use my debit card so long I don't go beyond the $1,000 limit a month ?

interesting

It's amazing how ignorance curse and swears at things she doesn't know.

Thank you Op. I know better now.

Did you see what the negative impact of the previous administration at point 5 on what customer do not know??. And some youths would still come up
praising the corrupt ones..

oo

I have been hearing we have to diversify our economy since i was in primary school. Nothing seem to have changed . As per d card paroles the CBN has not choice. Nigerians always find away around obstacles sha

Ordinary citizens like me who make transactions can cope, but the fraudulent scums who would rather travel out with 1000 atm cards to whdraw $ and £ at official rates and come back and sell at black market rates are the ones making the most noise.

If you must pay in dollars apply genuinely to banks with supporting documents to prove purpose of use, and you will get it even if not immediately. But we must stop our "unruly attitudes" and be prepared to follow procedures in this administration, if not go to the black market and source for dollars.

oboy na to park go ghana o, no time to read n understand this oyibo.




Naija 2016 get belle

Op, you've said it all but wait TANOID and WAILERS club of Lagoon will not understand it.

exactly

MoonChildng:
Thank you for the explanation,does this mean I can still use my debit card so long I don't go beyond the $1,000 limit a month ?

I personally believe Nigerians can make the most of this present situation as difficult as it may seem. Like they say, "when life hands you lemons, make lemonades out of it". This is the time to look inwards. We should look to exporting our produce. Industries should look inwards for raw materials. This is a good time for Nigerians in the diaspora to make investsments at home; they'll get good value for money. And so many of our local industries will witness growth with this policy.If we get our acts together, we can make it work. Nigeria will be great again!