One cannot be certain whether Nigerians would celebrate or decry the recent Central Bank of Nigeria’s decision to reduce the existing limit on the usage abroad of Naira denominated cards from $150,000 to $50,000 per annum, per person. Nonetheless, the directive to banks in CBN’s circular of April 13,2015, may mean nothing to possibly over 98% of our country men, who have never seen the inside of an aeroplane.
So why would the CBN enfranchise barely 2% of Nigeria’s 170m population with such privilege, when, every citizen, presumably, has an equal stake in our communal dollar reserves, which, inexplicably fund the consumption habits of a tiny minority of Nigerians when they travel abroad.
Clearly, by reason of abject poverty because of corruption and deliberate economic mismanagement, over 150 million Nigerians are excluded from liberal personal spending from our common Treasury’s depleting pool of dollar reserves.
Nonetheless, it is intriguing that the CBN actually set the earlier limit for convertible Naira ATM cards at $150,000; pray, how many Nigerians earn over N25m per annum, and is it conceivable that such people would carelessly spend their total income on overseas travel expenses without regard to other social and economic needs back home?
Consequently, it is probably more plausible to conclude that the CBN management consciously and deliberately left the door open with such a high withdrawal limit to induce and facilitate forex round tripping and capital flight and thereby support those substantial financial leakages, which serve the interest of the rentier class and a tiny business elite.
It is no secret that in order to circumvent banking regulatory guidelines, several Nigerians have multiple accounts with different banks and may therefore also have a plethora of ATM cards. Thus, before last week’s reduced limits, a ‘business man’ with say ten ATM cards could transfer about $1.5m or almost N300m in one week’s trip abroad.
Furthermore, nothing stops this “business man” on return to Nigeria from obtaining a new set of ATM cards to repeat such cash movements over and over again every year. Ultimately, if each dollar so transferred, were re-priced in the black market with a N10 premium, our smart Alec would be over N15m richer with every trip. Regretably, the proceeds of such transactions may also be used to fund the smuggling of those contraband consumer goods that jeopardise the operations of local industries; worse still, the dollar exchange values may also inadvertently be used, ultimately, to fund the activities of terrorists and other miscreants who seek to destabilize our nation.
However, Mr Emeka Emuwa, The Managing Director/CEO of Union Bank, labored to explain at a recent 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”.
Nevertheless, in view of the several serious economic distortions caused by the convertible Naira ATM facility, the recently reduced limit of $50,000 may be seen as a halfhearted attempt to eliminate its evident adverse consequences. Once again, therefore, one may ask, how many Nigerians earn N10m annually, and whether or not it is feasible that such people would also choose to spend their gross annual salary package on overseas travel expenses and shopping.
Surely, developing countries with persistent foreign exchange challenges, such as ours, would be expected to be more judicious in the management and application of the available ‘scarce’ foreign reserves, to the greater good of more Nigerians. Besides, what happened to the discipline and control associated with earlier business or holiday travel allowances, which were available on application through banks to genuine travellers for values between $5,000 – $10,000.
Furthermore, the preceding practice also provided for the remittance of school fees and related expenses for Nigerian students abroad after the submission of relevant supporting authentic documentation to respective banks.
However, as from September 2013, with the introduction of the ‘laissez faire’ Naira convertible debit card and forex sales that required no documentation, it ironically became much easier to transfer $150,000 for no legitimate genuine purpose while a whole ‘trunk’ of papers and several follow ups to the bank would be required to obtain forex allocation for school fees and other living expenses for Nigerian students abroad.
Thus, in the face of our rapidly depleting reserves and the clear evidence of the misapplication of the convertible ATM facility, it would certainly be more proactive to reduce the limit of such travel allowances to not more than $10,000 per annum, per person. There is no reason why separate applications cannot be submitted to banks, as in the past, with supporting documents for any legitimate, additional genuine forex requirements above this sum.
Curiously, the earlier Naira convertible ATM card limit of $150,000, was, an attempt according to CBN circular of 26th September 2013, to address the impact of the high volume of dollars imported by Nigerian banks, so as to prevent money laundering; paradoxically, the existing limit for Naira ATM cards abroad before 26/9/13 was just $40,000 per person, per annum, it is surprising therefore that CBN’s strategy against capital flight and money laundering was an authorization for banks to sell $250,000 weekly, to each of the almost 2,000 registered Bureau de change scattered throughout Nigeria.
It is not clear how the CBN expected that this arrangement could restrain money laundering or redeem the Naira exchange rate.
