Naira/Dollar atm cards and inexplicable profligacy – Vanguard

ONE cannot be certain whether Nigerians should celebrate or decry the recent decision by the Central Bank to reduce the existing annual limit from $150,000 to $50,000, per person on usage of Naira/dollar debit cards abroad.

Nonetheless, the enabling directive to commercial banks in CBN’s circular of 13 April 2015, may mean nothing to possibly over 98% of Nigerians who may never have the opportunity of spending foreign currency abroad. So why would CBN choose to deliberately fund the often lavish consumption habits of a tiny minority of Nigerians.

It is intriguing that the earlier limit for N/$ ATM debit cards was as high as $150,000. Pray, how many Nigerians earn N25m annually, and is it conceivable that such people would carelessly spend their total income on overseas travel and shopping expenses without regard to other essential living expenses?

Thus, it is more reasonable to conclude that with such liberal limits, CBN’s management may have consciously and deliberately left the door wide open to encourage and facilitate forex round tripping and capital flight for the rentier class and a tiny business elite. Indeed, a portfolio “businessman” with, say, 10 ATM cards obtained from multiple bank accounts could withdraw about $1.5m (N300m equivalent) in one trip abroad at official exchange rate.

Furthermore, such forex transactions can be serially repeated with new sets of ATM cards every month. Worse still, the dollars acquired at the lower official exchange rates, may, ultimately, regrettably fund activities of terror groups and smugglers, whose activities may threaten security and destabilize local manufacturers, to reduce both output and employment opportunities.

Indeed, with the prevailing climate of brazen corruption, it is inconceivable that CBN failed to foresee the possibility of such extensive abuse of Naira debit cards abroad. However, Union Bank’s CEO, Mr. Emeka Emuwa, recently laboured to explain at a press briefing that “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, and there have been cases of arbitrage (forex round tripping).

So, in order to sustain stability, the bankers’ committee agreed that the limit for the use of the Naira debit cards abroad should be reduced.” Readers may note that, Emuwa, made no mention of any attempt to identify serial perpetrators or their sources of income, nor did he talk of sanctions imposed on those found culpable of gross misapplication of Naira debit cards abroad!

Nonetheless, this observation of liberal abuse was obviously belated as the situation was already so bad, according to the Bankers’ committee spokesman, that the practice had become “a threat to the exchange rate stability of the Naira.” Nevertheless, the revised debit card limit of $50,000 seems a halfhearted attempt to reduce the consequences of the policy.

The question nonetheless, is, how many Nigerians earn N10m annually after tax and sundry deductions and still spend $50,000 on international travel and shopping. Surely, such forex profligacy is inconsistent with the subsisting dollar scarcity which has challenged the real sector, and restrained employment opportunities.

It is inexplicable that under the earlier protocol, genuine travellers for business, holidays or further studies, were required to submit authenticated documents with declared purpose for approval of between $5,000 and $10,000.

However, with CBN’s subsequent ‘laissez faire’ directive of September 26, 2013, personal forex procurement at official rates for upto $150k with debit cards, invariably became much easier, without formal documentation nor declared purpose, even when forex provision to manufacturers for raw material imports, remained in suspense for several months.

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