LeapRate's Daily Forex Industry Newsletter
Join now to receive first access to our EXCLUSIVE reports and updates.
Screenshot of a breaking news alert e-mail from Q2 2017
Since the demise of Liberty Reserve and the subsequent arrest of its founder, the task of gaining FX business from Nigerian clients has been a challenge for retail brokers.
Due to the restrictions which are put in place not only by merchant services and payment processing companies, but also the Nigerian government’s restrictions on foreign exchange, many Nigerian bank customers have resorted to using electronic payment cards such as MasterCard and Visa card to circumvent foreign exchange regulations.
The purpose of these cards is to allow the customers spend from their Naira account whenever they travel abroad. The Central Bank of Nigeria however, stipulates a maximum limit of $150,000 per year for each card holder.
According to a report today by Financial Vanguard, a Nigerian news source, bank customers are beginning to obtain a naira MasterCard or Visa card linked to different accounts in order to be able to access dollars above the $150,000 limit.
Further investigations also revealed that banks are not only aware of this practice but encourage it. A top foreign exchange dealer who spoke to Financial Vanguard on condition of anonymity said the banks encourage it because it enables them make more money through the charges deducted when customers use such cards for dollar-denominated transactions or withdraw dollars while outside the country. The dealer also told Financial Vanguard that the practice is prevalent among banks in the country.
Though the Central Bank of Nigeria Director of Corporate Communications, Ibrahim Mu’azu did not respond to enquiries on the response of the apex bank to this malpractice, a top management staff of the bank, however, confirmed to Vanguard that the apex bank was indeed aware of this malpractice. Speaking under condition of strict anonymity, he said: “We are aware of it and I can tell you it is a breach of regulation.”
“But we are not doing anything about it for now because of the challenge of tracing individuals with multiple bank accounts in the industry. But I can assure you this is one of the problems that would be addressed with the Biometric Verification Number (BVN). Once we complete the project and every bank customer has a BVN, it would be easy to trace those who have multiple accounts and also monitor what they are using the accounts to do” concluded Mr. Mu’azu.
As far as the legal position is concerned, the Central Bank of Nigeria stipulates that cards may be issued in Nigerian Naira or in any other convertible currency, however the international usage limits and frequencies for Naira denominated cards shall be defined by each participating bank.