CBN blames banks for limits in use of credit cards abroad
Regulator says restriction healthy for economy
CONTRARY to claims in some quarters, it is not the Central Bank of Nigeria (CBN) that has imposed limitations on the use of debit or credit cards outside the country . Rather, it was Deposit Money Banks [DMBs] that made the restrictions.
This was the position of the apex bank which, however, admitted that the development was a healthy one for the economy as Nigerians can no longer use the debit or credit cards for frivolous expenses abroad. Before now, individuals and corporate organisations had used such cards to import various items thereby drawing down the nation’s foreign reserves.
The Director of Monetary Policy Department of the CBN, Moses Tule, while fielding questions from reporters in Abuja at the weekend, said: “The limitations on the use of debit or credit cards outside the country was not a limitation placed by the CBN. They were restrictions that Deposit Money Banks placed because they have to settle whatever transactions you make with your debit cards with their corresponding banks in foreign currency.
If the banks do not have the foreign currency to do that, then you create a liability on them which will crystallize on their balance sheets.
“But looking at it holistically, does the CBN sympathise with the situation Nigerians find themselves in not being able to use their debit cards outside the country? Yes, the CBN certainly does sympathise with them. But can the CBN stop it? At this point we are in in this country, the obvious answer is that the CBN cannot stop what the banks are doing now and the reason is very obvious.
“Our priorities as a nation for the use of foreign exchange are: 1) for the settlement of matured Letters of Credit (LCs) opened for importation; 2) for the importation of petroleum products until such a time either when we have our refineries fully operational and; 3) for the importation of raw materials.
By the time we meet these three priorities and given the level of current flow into the reserves , you will discover that people who are using their debit cards overseas for shopping can never be on the priority list.”
Tule continued: “It is a healthy development where Nigerians can no longer use debit cards abroad, though it is inconvenient. Right now the country is going through very difficult times because of developments in the oil market. Foreign exchange under the condition Nigeria has found itself, has become a seasonal commodity in the sense that it depends on the movement of the price of oil.
If oil prices are high, then we build reserves; if oil prices are low, then we have no reserves and we are in a crisis. That should not be for an economy as big as Nigeria’s because we should by now, since 1960 have sufficiently diversified the economy to a point where developments in oil prices no longer would matter to the macro economy. But unfortunately that hasn’t been the case which is why sometimes, these kinds of decisions are being made.”
On where the dollar cash has gone to, Tule explained: “Whatever decisions banks take with respect to allowing their customers use debit cards overseas are strictly business decisions. They are looking at their balance sheets, at their capacity to settle with their corresponding banks the obligations that will crystallize on their balance sheets.
“Will they open themselves to people out there using their debit cards for shopping when we have seen that the reserves are not there? We have to use what we have essentially for the purposes that will keep the wheels of the economy running. We have to produce for export ; we can’t continue to depend only on the export of crude oil.”
He continued: “ At a time, banks began to say they had too much dollars and were not going to accept dollar deposits into their accounts anymore. It got to a point people were substituting the dollar for naira . But we are proud Nigerians and we are proud of our currency.
“So when CBN saw people creating artificial demand and by substituting naira in their savings with dollars , pilling pressure on external reserves, and this at a point when oil prices were going down, something had to be done.
So as more and more deposits were coming, the banks said: “Look, since there are restrictions by the CBN that we cannot even transfer outside the country, we do not see any reason why we would continue to accept more of these deposits or savings in individual accounts.
Now, how banks are treating their savings and customers’ deposits in their accounts are strictly their business decisions and am sure the banks have not said customers do not have access to their dollar accounts .What they are saying is that if you deposited cash you can ask for cash; if the deposits in your account were by way of transfer and you want to carry out a transaction, you can only transfer .
In the export domiciliary account where people bring in their export proceeds and want to use those accounts for other purposes other than the importation of raw materials we have placed restrictions on that by saying: ‘Look, if you benefited from cheap foreign exchange and imported raw materials by using the official channels and you now want to go and draw cash so that you can sell them in the parallel market, we will not allow you because first you generated the proceeds by accessing the official window which was cheaper.
The currency of use in this country is the naira not the dollar so you cannot expect to carry out dollar transactions over the counter in an economy whose currency is not dollar-denominated .We must learn to respect systems and laws that govern our system.”
On how long the restrictions may last, the CBN director said: “As soon as we build up reserves up to $200 billion or more , we expect that just as the restrictions were not there initially, most of the restrictions will be lifted.
But for now, every hand needs to be on deck; we need to earn foreign exchange as a country.
“You can improve your business processes in order to export and earn foreign exchange and that is what the country is calling on patriotic Nigerian businessmen to do.”