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Posted by Felix Okoli on Tuesday April 21, 2015 at 9:38:46:

Based on reports I've read, it appears that the Central bank of Nigeria has recently reduced the amount of money Nigerians can have access to for spending or withdrawal using their Naira Cards such as Visa or Mastercard.

The limit used to be at most $150,000 per year but this has been further reduced to $50,000 per year for a user. What it basically means is that every Nigerian who has been issued a Naira debit or credit card may only use it for foreign transactions to a maximum limit of $50,000 in a year.

Also, the daily cash withdrawal limit for those foreign transactions has been limited to $300 per day. What that means is that you can't withdraw more than $300 from a foreign ATM with a single Nigerian Visa or Mastercard per day.

Looking at these limits based on how CBN is using it, I think a Nigerian may be able to do more than that if they make use of more than one bank issued card. I don't think it's limited to people but to cards.

It seems the CBN is doing this in order to reduce the rate at which Nigerians are requesting or buying foreign currencies with the Naira and in this way weakening the value of the Naira. In foreign currency transactions, when a buyer uses a first currency to buy a second currency, it's normally the first currency that will lose value since it's the one that is being given up.

Why is the CBN reducing these limits? The main reason is actually to protect the vale of the Naira and it may not be unconnected to the fact that some people now use it for business to the detriment of the Naira. Well, some financial experts have claimed that some Nigerians were now using the window to make money through a process known as arbitrage. They do this by travelling abroad with their Naira cards, making a withdrawal from an ATM to get US dollars or British Pounds at the inter-bank rate and then selling it in Nigeria by the time they come back at the black market. They could be netting a profit of N10 per unit of any foreign currency they sell since inter-bank rates used for Naira cards are much lower than what obtains at the black market. However, I think a person would really need a huge capital to make profit from that method since he would have to pay for flight tickets at least.

The bottomline is that if you are traveling abroad with a Naira card, you now have less access to foreign currency that what used to be obtained. $300 per day is your withdrawal limit and $50,000 per year is your spending limit.

Is it possible to bypass these latest CBN restrictions? I think it's possible. One way would be by using multiple Naira cards from different banks. Another way would have to be by carrying extra cash with you for travel. A third way would be to just make payments directly with your cards but that will still be limited to $50,000 per year. A fourth option is by simply opening a foreign bank account and making bank transfers from Nigeria so that you can have more access to funds for foreign transactions.

The spending and withdrawal limits placed by the CBN will affect not just travellers but also people who make foreign online transactions even while in Nigeria such as online shoppers. It will affect Paypal Nigeria as well as Visa or Mastercard users when making online payments.

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Comments:
Re: CBN reduces foreign transaction limits for Naira cards Reply by freda on Friday July 17, 2015 at 18:10:44:

it all balls down to the same thing.. instead of chasing the little amounts from individuals ,can they just promote export and reduce import by having more made in Nigeria goods so the huge volumes can come in and stay in.

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Re: CBN reduces foreign transaction limits for Naira cards Reply by chima on Thursday October 8, 2015 at 20:38:6:

I just got frustrated trying to pay for an airline ticket online. The ticket price was above the $300 daily limit. I feel this policy is too stringent and sweeping. Why deprive me of my legitimate right to spend less money on my flight ticket when i pay online. The only option open to me now, is to buy the ticket through a travel agent or accross the airlines counters at a much higher rate. The CBN should please look at all ramifications of this policy for the good of all concerned.

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