Card Suspension: Banks Record Increase in Domiciliary Account Requests

CBNThe governor of the Central Bank of Nigeria (CBN), Mr. Godwin Ifeanyi Emefiele
  • Banks Record Increase in Domiciliary Account Requests

In the last three weeks, Deposit Money Banks have recorded an unprecedented surge in new domiciliary account holders, it has been learnt.

Top bank executives told our correspondent that following the suspension of foreign currencies’ withdrawals via Automated Teller Machines abroad using naira debit cards, the DMBs had recorded a sharp increase in the number of customers coming forward to open domiciliary accounts.

The banks had about three weeks ago stopped their customers from using naira debit cards to withdraw foreign currencies via the ATMs in foreign countries, especially European nations, the United States and Canada.

While majority of them also stopped online transactions dominated in foreign currencies and usage of the cards on Point of Sale terminals overseas, a few limited the PoS and online transactions to just $100 per customer in a month.

The decision by the banks followed the acute dollar shortage ravaging the economy, a situation that has made it difficult for Nigerian lenders to settle their counterparts abroad transactions arising from use of the ATMs and PoS machines abroad, as well as online transactions that are denominated in foreign currencies.

Following this development, top bankers told our correspondent that the rate at which the DMBs were recording requests for new domiciliary account openings was alarming.

In order to be able to carry out transactions in foreign currencies, they said many bank customers were now opening domiciliary accounts, which were also being accompanied with applications for dollar debit cards.

“It has been alarming in the last two to three weeks; there are days we record over 200 fresh applications for domiciliary account opening and dollar debit cards,” a top official of a tier-1 bank told our correspondent on condition of anonymity.

Aside from new customers applying to open domiciliary accounts and get dollar debit cards, bankers told our correspondent that they had recorded a sharp increase in the number of existing domiciliary account holders who were now applying for dollar debit cards to enable them to carry out transactions denominated in foreign currencies.

The DMBs had on October 14 announced the suspension of the use of their naira debit and credit cards in foreign countries, citing the acute dollar scarcity in Nigeria as the reason.

Stanbic IBTC Bank, Standard Chartered Bank Nigeria and Guaranty Trust Bank, while making the announcement, advised their customers to apply for dollar or pound sterling cards to enable them to do foreign exchange denominated transactions.

The decision by the banks has made thousands of United Kingdom and Canadian visa applicants and intending travellers wanting to book hotels online to be stranded.

Many of them have had to rely on travel agents, who use their partners abroad, to make payment for visa fees and hotel bookings.

Reacting to the development, the Chairman, Committee of e-Banking Industry Heads, the umbrella body for heads of electronic banking and payment cards in all the commercial banks in Nigeria, Mr. Dele Adeyinka, said until the dollar situation in the country improved, the banks would find it difficult to increase the limit for online and the PoS transactions, or lift the ban on the ATM withdrawal abroad.

He said, “For cards, we also considered that if we allow our customers to continue to go outside the country to use these cards, it will naturally get to a state that will further reduce our FX position as a country. This is because those other countries will need to be settled and they will not be settled in our national currency; they will be settled in foreign currencies (dollars or pounds).

“Of course, if anything is going to affect our country, it is in our interest as a country to put it on hold. We are not stopping it outright, we are only saying let us put a limit to the number of what our consumers can use for transactions outside the country.

“So, it is a temporary restrictive measure. It is hurting not just the consumers, it is hurting the practitioners, all of us; but it is a temporary pain we all have to bear now in the interest of our nation. Once we clear this hurdle and have enough FX reserves to be able to settle our bills, the cards will continue to work.”

The former Chairman, CeBIH, Mr. Tunde Kuponiyi, who is also the Group Head, Cards and e-Banking, Ecobank Nigeria, said most banks were no longer funding naira debit cards due to the scarcity of dollars.

As a result, he said most customers having obligations to settle in foreign exchange were applying for dollar debit cards.

According to industry experts, the development will lead to a marginal increase in the number of payment cards (debit and credit cards) in circulation in Nigeria.

Currently, industry data indicate that there are about 40 million payment cards in circulation in the country.

Unconfirmed banking sources said international payment card technology companies operating in the country, Visa Incorporated and MasterCard Incorporated, might record a sharp decline in their revenue from Nigeria following the naira payment card crisis.

It was learnt that the drop in the payment card usage abroad by Nigerian bank customers would have negative impact on the companies’ revenue.

Meanwhile, it was learnt that some Nigerians who travelled overseas without obtaining dollar debit cards had challenges making payments.

Findings by our correspondent revealed that the travellers were calling their banks from overseas, asking to know why they could not make payments with their cards via the Point of Sale terminals.

For some banks, which only limited their online and the PoS transactions, it was gathered that customers were calling from overseas to query why they could not make transactions above $100.

Many of them, it was learnt, were disappointed to be told that they had exceeded the $100 monthly limit permitted by the banks.

The ban and limit imposed on the usage of the payment cards overseas by Nigerian banks, experts said, would continue to dominate the banking space for the next few months.

About the Author

Samed Olukoya
Samed Olukoya is the CEO/Founder of investorsking.com, a digital business media, with over 10 years' experience as a foreign exchange research analyst and trader. A graduate of University of East London, U.K. and a vivid financial markets analyst.

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