How the “Primitive” CBN $20 Debit Card Limit Fuels the Forex Black Market 

“Our interviews show that the CBN policy of rationing forex has pushed demand to the black market for foreign exchange. This outcome is contrary to the CBN’s oft-repeated intention to eliminate the black market which the CBN Governor, Godwin Emefiele, once described as “tainted”.

Before April 2015, each Nigerian could spend as much as $50,000:00 per annum shopping online or in stores abroad. The limit was reduced to $3,000, $500, and $100. It is now officially $20 but in reality, $0.00. Virtually no bank authorises any payment using naira debit cards even if the transaction involves only five cents.

Nigerians who need to pay for consumer items like clothing or electronic gadgets, subscriptions for apps or music, magazines and newspapers or software or services critical to their business, etc. have to find alternatives to paying.  

In previous years, Nigerian bank customers could use their naira-denominated debit cards to pay for transactions billed in US dollars online and spend up to $100 (₦50,000) per month. Debits are made directly from their naira accounts at current exchange rates for every purchase. We spoke to some Nigerians about the alternatives they have found to making forex payments with their naira debit cards. 

The Central Bank of Nigeria subsidises all imports, (by online shoppers as well as businesses) by fixing a price for forex rather than allowing the price to be freely determined by letting all importers bid to buy forex. This forex subsidy is no longer viable as Nigerian oil revenues dwindle. The CBN has chosen to maintain the low and unrealistic price of forex and supply it to a selected few rather than allow free demand from all potential buyers to drive up the price.  

Our interviews show that the CBN policy of rationing forex has pushed demand to the black market for foreign exchange. This outcome is contrary to the CBN’s oft-repeated intention to eliminate the black market which the CBN Governor, Godwin Emefiele, once described as “tainted”. Nigerians who buy foreign goods have not changed their habits. Some of them do not want the CBN’s subsidy to import personal items. They prefer to use their naira debit cards, buying forex at a market-determined rate, rather than source forex at the black market. 

Jadesola Adeyinka, Entrepreneur, 37 years old

“If the government could make forex more available to us, I really would not mind paying more for the dollars…I was once given two fake $100 notes while buying dollars at the black market. That kind of thing would never happen in the bank”. 

I am an entrepreneur. I buy shoes, shirts, bags, and the like from online stores abroad and then resell them to my customers here in Nigeria. Things were all smooth and business was doing well until the Central Bank started putting limits on dollar purchases on naira debit cards. Initially, I thought it was just something that would be on for a while and then everything would go back to normal. But it didn’t happen like that.

To continue my business, I have had to open a domiciliary account and buy dollars from the black market to fund the account. The black-market rates are outrageous. It is difficult to maintain my profit margin as I cannot fully transfer the price increase to my customers. Otherwise, I won’t be able to retain customers. No, I don’t have family members or know anyone abroad that could help me pay for my orders.

If the government could make forex more available to us, I really would not mind paying more for the dollars. At least I would know that I am getting it from the right source. I would not have to bother about looking for dollars on the streets where the prices are never certain. I was once given two fake $100 notes while buying dollars at the black market. The loss was on me. That kind of thing would never happen in the bank. 

Also Read: Godwin Emefiele: Incompetence, impunity and inordinate ambition brought us here

Olumide Adetayo, Accountant, 54 years old

“If the Central Bank of Nigeria had supported a single exchange rate since 2015, I believe the dollar should be no more than N400 today.”

How often I shop online and how much I spend depends on more than the dollar spending limit on my debit card. Eight years ago, I used to buy things on Amazon almost every three months. Mainly clothes, shoes, books, coffee, chocolates, and the occasional electronic gadget. Then I could buy seven to eleven items, spending an average of $600. It was very convenient using (naira) debit cards.

Now banks say you can only spend $20 on your debit card in a month. For almost all the banks, you can’t spend even $0.1. I still buy clothes and the usual things from America. It is cumbersome to first purchase dollars, go to the bank to deposit it in your domiciliary account, and then transfer it to a dollar debit card. This creates some friction. There are times I want to buy something because it is on sale but I can’t because I don’t have money in my dollar card. 

But of course, I could buy  $2,000 or $5,000 at the black market and put it in my dollar debit card so I could buy anything online whenever I wanted. But the reality is that I cannot afford to shop now when the exchange rate is N800 to the dollar the way I used to do when it was N250 or N300.  Nigeria now exports about 60% of the oil it used to export. That means there are fewer dollars to supply. 

 The Central Bank of Nigeria allocates $20 per month to every bank account holder at the same exchange rate. Does a 54-year-old man running a company with a N200 million turnover spend the same amount of dollars as his 28-year-old secretary or his gateman or driver? Why is the CBN then allocating $20 per month to their debit cards at the same price? 

This has not solved the basic problem of lower dollar revenue from oil. The CBN has created another problem- inefficient allocation of the reduced foreign exchange. The CBN is denying the reality and is pushing demand for dollars to the black market. It is making the exchange rate unstable and the naira weaker. If the Central Bank of Nigeria had supported a single exchange rate since 2015, I believe the dollar should be no more than N400 today.

Also Read: The Naira in 2021: Gap between CBN & Parallel Market Rates to Stay

For my business, we have to pay for little expenses like subscriptions and services professionals in other countries render. This is an average of $250 a month. We have to pay for these things no matter the exchange rate. We sometimes miss these payments because of the long process of converting the naira and then putting it in the dollar debit card. 

All these controls and manipulation by the Central Bank of Nigeria are affecting people’s businesses. If we can’t pay for simple things abroad, we are giving outsiders the impression we are running a primitive economy. And indeed, we are. A primitive economy does not attract investments. 

I heard about some fintech apps that you could use to make payments.  But I am not very tech-savvy. I opened an account on Chipper only three months ago. There are some problems with paying with Chipper. Some service providers that are very important to our business, e.g., Google, don’t accept Chipper payments. 

Adegbenga Omotosho, Graphic Designer, 27 years old 

“You can transfer funds from your Chipper naira account to your dollar card in under one minute. The exchange rate is slightly better than on the black market.”

I seldom shop on foreign websites. So, I barely noticed when the Central Bank of Nigeria and the banks started imposing dollar spending limits on debit cards. I was not really affected. But now I am a professional graphic designer. I use a number of software for which I have to pay monthly subscriptions. This is around $150 monthly. The dollar limit on naira debit cards is a problem for me now. 

A friend that has been a graphic designer told me about Chipper, an app on which you can create a naira account and have a dollar debit card. It’s quite easy to use. The dollar debit card is “virtual”, it’s not a physical card. Your card number, the CVV number and other details are displayed on the app within minutes and you can start shopping with it. You can transfer funds from your Chipper naira account to your dollar card in under one minute. The exchange rate is slightly better than on the black market. 

The Central Bank should let us have access to whatever amount of forex each Nigerian or business requires but now determine the price based on supply and demand. This would reduce the demand for dollars because the official or CBN price will go up. If the CBN exchange rate settles at N670 for the dollar, many people who would have tried to buy clothes or shoes abroad with their debit cards at N455 to the dollar would forget or postpone the shopping. But people will stop buying on the black market because the CBN exchange rate would be lower. 

Dolapo Obisesan, Computer Engineer, 32 years old  

“I wanted to buy something on Ali Express recently. It costs just $28. It was really annoying having to tell someone abroad to help me.  Something that I could have easily done myself.”

It has been very inconvenient since the Central Bank of Nigeria directed commercial banks to reduce the limit for dollar transactions on naira debit cards. I have had to look for an alternative. Family members and friends help me to pay for shopping. I send links to what I want to buy to them and they pay for me. They have Nigerian bank accounts so I pay them the equivalent of what the shopping costs in naira. We agree on what I should pay back based on the black-market rate. They add something to the prevailing black-market rate. As much as N5 per dollar. Their argument is that this compensates them for the stress of doing the shopping for me. I have not been able to open a domiciliary account. 

I wanted to buy something on Ali Express recently. The cost was just $28. It was really annoying having to tell someone abroad to help me. I could have easily bought it myself. Nigerians are used to adapting to whatever new mess our government creates. I would be happy if the Central Bank of Nigeria woke up tomorrow and said they are increasing the dollar limit on the naira debit card to $1,000. It wouldn’t matter even=-[] if the exchange rate would be close to the black-market rate. This would at least reduce the stress of shopping.

Olamilekan Adedeji, Social Media Manager, 27 years old

“I really would not mind if banks would sell the dollar at a regulated price, as long as I have access to shopping or paying for my monthly subscription without having to hustle for dollars at the black market.”  

Before the CBN and Nigeria commercial banks started their rubbish, I used to shop frequently on Amazon, ASOS, etc.  I didn’t have to bother about any dollar limits. What mattered was having naira in my bank account. The $100 limit was bad enough. Now it is $20. 

I now ask friends and relatives abroad to help me shop with their cards. I refund them in naira using the black-market rate. But I now wait to buy a lot of things at once every 3 or 4 months so I don’t keep bothering the people whose cards I use. 

I wouldn’t mind if the banks and CBN allow us to keep using our naira debit cards without any limit even if we have to get the dollars at an exchange rate close to the black-market rate. I would be able to do my shopping and pay for monthly subscriptions without hustling for dollars.  

Ikujeisi Elisha, Computer Scientist, 31 years old 

“I don’t want to ask people abroad to shop for me. I buy the dollars I need from the black market.”

 Back in 2014, I could easily order things like clothing, shoes, bags e.t.c and pay with my naira debit card without having to bother about the dollar rate or how to pay. Usually, I spend around $400 about every two months. The problem started when the CBN reduced the amount we could spend on our debit card to $100. Then more trouble followed with the reduction of the limit to $20.  I don’t bother to use naira debit cards to shop now. 

I used to shop with Barter by Flutterwave. The only downside was that they converted naira to dollars according to the black market rate. That is even no longer an option as the service is not being offered again. It’s being from the frying pan to the fire. Some of my friends send money to people abroad to buy things for them and deposit the naira equivalent in their bank accounts in Nigeria. They ship the stuff to them or bring them when they are visiting Nigeria. But you have to wait 3 or 4 months.  I still shop abroad but not as much as before because of the exchange rate. Now I have a domiciliary account and a dollar debit card. I don’t want to ask people abroad to shop for me. I buy the dollars I need from the black market. 

Moyosola Hassan, Businesswoman, 46 years old

“The limit on naira debit cards hasn’t really affected my business. I usually get forex from middlemen who have  Nigerian bank accounts.”

I import as well as export to Dubai and French West African countries. The limit on naira debit cards hasn’t really affected my business. I usually get forex from middlemen who have  Nigerian bank accounts. I pay the naira equivalent of whatever currency I need into their naira accounts. However, the exchange rate is an issue. I need a lot more naira now to pay for the same amount of forex. The middlemen are also scared that the naira will depreciate further. They factor this in when negotiating the exchange rate. I do not have an alternative to the business I do.  So, I still buy fabrics, jewelry, shoes, etc. from abroad. I just have to spend a lot more naira now.