Banks in Nigeria Set to Limit Debit Card Spending Abroad in A Bid to Ease FX Risk

Nigeria is facing dollar shortage due to fall in the price of oil, the country's main export, and domestic banks are avoiding transactions with hard currency

Nigerian banks are mulling over the reduction of the amount that their customers can spend using their debit cards abroad, said two lenders on Monday. Banks are trying to restrict risks associated with foreign currency settlement

South Africa's Standard Bank's local unit, Stanbic IBTC Bank, said that it will limit the spending by half for its offshore card transactions to $500 per month, beginning on Monday. It will also restrict cash withdrawals to $100.

Zenith Bank, another top lender, said that it intends to suspend the use of debit cards for cash withdrawals abroad temporarily, and reduce the monthly spending limit abroad to $200. "This review is in response to today's economic realities," Zenith said in a notice.

Foreign currency (Representational Picture) Pixabay

Other Lenders Limit Withdrawal For Individuals

The country is facing dollar shortages because of the sharp fall in the price of oil, Nigeria's main export, and domestic banks are trying to avoid transactions with hard currency. Other lenders — Ecobank and Fidelity Bank— have also lowered withdrawal limits for individuals while abroad.

Such moves have previously been at the behest of the central bank, but it was not clear if the regulator was behind the latest action. The central bank did not respond to a request for comment.

Nigeria Yet Resume Forex Sales

The bank is battling to conserve dollar reserves that are down 19 percent from a year ago. Last week it depreciated the currency on the official market prompting the naira to weaken on the black and over-the-counter spot markets.

Bankers told Reuters that it now takes more than six months to settle foreign lines of credit. Nigeria is yet to resume forex sales to retail currency traders after it banned international travel as part of a lockdown measure to slow the spread of the coronavirus that has killed 778 people and infected more than 36,000.

(With inputs from agencies)