NIGERIA: The 'Real' Reason CBN wants to stop you from using your ATM cards outside Nigeria.

On April 2015, The Bankers Committee and the CBN at the completion of its Bankers Committee Meeting [which includes CBN and CEO’s of commercial Banks] agreed to place spending limits for naira debit card holders who wish to use the cards outside the country. The Managing Director of Union Bank, Emeka Emuwa explains it this way;

"Relating to the discussion around the stability of the exchange market, one of the areas we looked at was the use of the naira debit cards. We did find that in a number of cases, people were using the cards in a manner that they were not expected to use them, there was some arbitraging going on and so we moved to control the trend. What was agreed at the meeting was that the limits will be reduced for the use of the naira debit cards,"

What it means?

The CBN is essentially saying that because some people profit from the arbitraging that obtains when they use their debit cards abroad they now want to limit your ability to spend your own money legitimately abroad. By arbitraging a user of an ATM card could for example withdraw dollars in the UK or US via an eligible ATM machine. When he does that he withdraws at the interbank rate and them doesn’t spend the forex. He then travels to Nigeria and sells the dollars at the black market at a higher price.

Example?

If you use your ATM card to withdraw $800 usd from a bank machine in London or Cyprus. You will withdraw at an interbank exchange rate of $1=198NGN . Then you can travel back to Nigeria with the cash and sell to a Bureau de change at the rate $1=250/300NGN . Imagine the profit you can make. Apparently this practice has been going for a while prompting the CBN to take the drastic measures to limit daily spending to $100 abroad and talks of totally banning the use of the ATM cards abroad from January 1st 2016.

How it affects you

It simply means for those of us who use our debit cards to shop abroad or pay for medical bills or school fees, or do whatever it is that is legal with your money, you now have a spending cap that will be placed on your card and ability to spend from it. Moreover from January 1st, you might not even be able to use the ATM Cards at all for any transaction.

This apparent U-turn puts a spanner into the works of banks who have for years advertised and lured depositors to spend their debit cards abroad even going as far as offering incentives such as cash backs.

It does feel like the CBN in its bid to control the depreciation of the naira has lost its mind by making utterances that suggest they have lost complete control of the forex market and the ability to defend the naira without capital controls.

Nigerians abroad complain...

*Additional report from Nairametrics, Bella Naija, Twitter and Facebook