Forex Liquidity Spurs Return Of Dollar Transactions On Naira Cards

In late 2022, commercial banks in Nigeria had decided to end a service that their customers enjoy, particularly those who travel out of the country or who pay for services and goods that are priced in foreing exchange.
This service allowed customers to roam the world and shop with their naira cards, weather they are junketing from one airport to another or they are in the comfort of their homes without having to worry on how to get the foreign exchange to pay for their lifestyle.
This was at a time that foreign exchange was a hassle banks had to source for foreing exchange alongside the central bank interventions to meet the huge demands for personal and business travel allowance and the settlement of foreing transactions on naira cards.
The strain that the scarcity of foreign exchange had put banks on had brough about the decision to put an end of spending foreign exchange with naira cards. Used to paying with their naira cards, bank customers had been put on a limbo.
They had to apply for dollar cards and go source for the dollars themselves. This increased the market share of the parallel market and business ideas for fintechs, who made virtual dollar an in thing for many.
This had seen the birth of fintechs like Chipper Cash, GoMoney, Cardtonic, Wallet Africa, BoldSwitch, Geegpay, and Fundall to fill the vacuum. Within the last three years, the fintechs enabled Nigerians without a bank dollar card to pay for services like Amazon, AliExpress, Netflix, Spotify, YouTube and conduct other international transactions.
However, after a three year pause in the service, banks are once again allowing customers to make international payments using their naira-denominated debit cards, following a long pause due to foreign exchange pressures.
For Fintechs that had based their business model on mostly virtual dollar cards, the game is about to get tougher as banks’ naira cards can now be used for cash withdrawals on automated teller machines (ATMs) abroad, purchases on international websites, and point-of-sale (PoS) payments outside Nigeria.
Providus Bank had broken the trend as the only bank in the country that allowed its premium customers to use their naira cards abroad as well as make online dollar payments using the naira cards. It is now no longer the only bank that has returned this service to its customers.
Presently, Guaranty Trust Bank (GTBank), United Bank for Africa (UBA), Wema Bank, and more recently, First Bank of Nigeira have joined in, reopening access for customers to use their naira cards for global transactions.
This is coming amid strengthend liquidity in Nigeria’s foreign exchange market and narrowing disparities between official and parallel rates, signaling rising confidence in the sustainability of foreing exchange liquidity.
GTBank, in a message to customers, noted that its naira card “now has a quarterly international spending limit of $1,000, enabling you to pay for your favourite items anywhere in the world. This limit includes up to $500 for ATM withdrawals abroad and up to $1,000 for online and POS transactions. Please note that the $1,000 quarterly cap applies to all international transactions, including cash withdrawals, online purchases, PoS payments outside Nigeria, and other related services.
UBA also announced a similar update, but specifically for its premium cardholders. “In line with our continued commitment to providing you with seamless and enhanced banking experiences, we are pleased to inform you that all UBA Premium Naira Cards, including Gold, Platinum, and World variants, are now enabled for international transactions.
“This means you can now use your Premium Naira Card for everyday payments, online shopping, PoS, and ATM transactions across the world, with more ease and flexibility.” The bank stated in an email to customers.
Wema Bank, in an email to notify its customers said, “Your Wema Naira Mastercard just went global! Now you can pay in dollars on all your favourite international platforms; Amazon, eBay, AliExpress? Netflix, Spotify, YouTube.”
Similarly, FirstBank in a recent email to its customers wrote “FirstBank Naira Mastercard can now be used for international transactions. Shop online or spend up to $1500 every 3 months on your preferred channel seamlessly.”
The resumption of international transactions on naira cards is a direct consequence of the improved forex environment. Analysts attribute this development to increased forex inflows from remittances, modest improvements in oil earnings, and reforms introduced by the Central Bank of Nigeria (CBN), including the unification of forex windows and clampdown on speculative activities.
The game is now set between fintechs and banks on who the customer chooses. This would be determined by the cost, ease of use and transaction limits. For now, banks have lower transaction limits compared to fintechs, as Wema Bank and First Bank offer $1,500 quarterly, GTBank restricts users to $1,000 quarterly, and UBA has a daily and monthly limit of $1,000 — depending on the card used.
However, Chipper Cash and Eversend have a monthly spend limit of $10,000, Geegpay restrict users to $5000 monthly, and Ufitpay has a $2,000 monthly limit, while Fundall has no limit. In addition, BoldSwitch and Sendbit have a $10,000 maximum transaction limit.
Asides this, the exchange rate used varies as banks use the official exchange rate. While the official and parallel exchange rates range between N1,530.26 and N1,550 to the dollar, fintechs seem to have a higher rate as Chipper Cash FX rate is N1,714/$, and that of Eversend is N1,619, as of July 11, according to Monierate.
On charges, virtual card operators like Geegpay deduct $0.5 per dollar transaction and 0.9 percent of transaction value for non-dollar purchases, while Boldswitch offers charge-free transactions on US websites, but shopping with other foreign currencies attracts 2.5 percent of transaction value.
Eversend charges a fee of $0.50 per transaction, but bills a 3.5 per cent fee when customers make payments via euros and pounds, while Ufitpay imposes a 1.5 per cent charge on each transaction on virtual dollar cards. However, banks like GTBank and UBA only deduct value-added tax (VAT) on each transaction.