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Banking Sector

Banks Suspend ATM Card Usage Abroad

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Godwin Emefiele CBN - Investors King
  • Banks Suspend ATM Card Usage Abroad

Deposit Money Banks have begun suspending their Automated Teller Machine cards (debit and credit) from working overseas as dollar scarcity continues to hit the economy badly.

Stanbic IBTC Bank, Standard Chartered Bank Nigeria and Guaranty Trust Bank on Friday announced the suspension of their overseas ATM card services.

Also suspended by the banks are online transactions priced in foreign currencies. This means that customers of the banks will no longer be able to use their debit or credit cards to make online transactions that are denominated in dollars, euros, pounds sterling and other foreign currencies.

In a note to its customers on Friday entitled: ‘Suspension of international transactions on naira debit cards’, Standard Chartered Bank Nigeria said, “Please be informed that effective immediately, your naira denominated debit cards will no longer be functional for international transactions.

“This is due to the current volatility in the foreign exchange market. Your naira-denominated debit cards can only be used for local transactions at Point of Sale terminals, Automated Teller Machines and online for Nigerian retailers.”

In a text message to its customers on Friday, Stanbic IBTC Bank similarly said, “Dear customer, kindly note that effective October 18, 2016, your ability to carry out transactions priced in foreign currency using our naira debit and credit cards will be suspended. We apologise for any inconvenience in this regard.”

Both Stanbic IBTC Bank and Standard Chartered Bank Nigeria advised customers seeking to carry out transactions denominated in foreign exchange to apply for dollar or pounds sterling debit credit cards. According to them, the dollar or pounds sterling debit or credit cards will be linked to the customers’ domiciliary accounts.

GTBank also announced the suspension of the ATM cash withdrawal service abroad. The lender also slashed its monthly ATM forex transactions to $100.

In a notice to customers on Friday entitled: ‘Review of the international spending limit on your naira Master Card’, the bank stated, “We write to inform you of the monthly spending limits currently applicable when using your GTBank naira Master Card for international payments via PoS and online. Previous monthly limit via PoS and online was $250; the new monthly limit via PoS and online is now $100. Kindly note that ATM cash withdrawal on your naira MasterCard is now only available in Nigeria.”

The development will make students studying in the United Kingdom, United States, Canada, Ukraine and other parts of the world to face more challenges getting their monthly stipends from their parents.

Most of the students had relied on the ATM card withdrawal to get their monthly stipends from their parents before now.

This means customers seeking to do foreign transactions will have to open domiciliary accounts and fund same with dollars, pounds or euros purchased from the parallel market at the prevailing exchange rates.

Although other banks have yet to announce the suspension of ATM card services abroad, findings by our correspondent showed that many lenders had reduced drastically the amount that customers could withdraw via ATMs abroad.

This is despite the fact that the banks have in the past few months reduced the monthly total amount of forex-denominated transactions that customers can do, using their naira debit or credit cards via ATMs and PoS terminals abroad as well as online payments or transactions.

As of last week, findings showed that some banks had slashed their daily ATM withdrawal limit abroad from the $300 advised by the Central Bank of Nigeria’s Bankers Committee to $100 due to their inability to source for dollars to fund the transactions.

Unconfirmed sources said some banks had reduced their monthly ATM withdrawal limit abroad to $100.

Top banking officials close to the development told our correspondent under the condition of anonymity that banks were increasingly finding it difficult to fund their foreign-currency denominated services, especially online forex transactions and overseas ATM withdrawals, as well as PoS usage overseas by customers.

A top official of Deposit Money Bank, who spoke on the condition of anonymity, told our correspondent on Sunday, “We have to stop the services. Formerly, we were sourcing forex at high prices and we were selling same to customers at similarly high prices. But the situation is now tense; the dollar scarcity has assumed a new dimension.

“This is coupled with the fact that some bank customers are using the platforms to do round-tripping. It is high time we stopped it.”

The decision by some banks to suspend overseas ATM card services and online forex transactions came barely one week after the CBN, through the Bankers’ Committee, raised concerns about what it called the indiscriminate and suspicious manner in which some bank customers were spending dollars and other foreign currencies abroad through their naira debit cards.

Consequently, the regulator said it had concluded that bank customers who spent above the $50,000 annual forex limit it imposed would be barred from the nation’s forex market.

The Director, Banking Supervision, CBN, Mrs. Tokunbo Martins, stated this after the 329th Bankers’ Committee meeting held at the apex bank’s office in Lagos on Wednesday.

She said, “In the CBN’s move to manage the demand for forex, there was a rule that was put in place that people were not allowed to withdraw more than $50,000 annually on their naira debit cards.

“For a while, the policy has been abused by bank customers, and the CBN has not taken any step to that effect. We have decided to take the step now to enforce the rule. So, we want members of the public to remember that that rule is in place.

“All your accounts are linked to a particular Bank Verification Number. Now, that the BVN only allows you to withdraw only $50,000 per annum, if people continue to breach that rule, they will lose access to forex market.”

Dollar scarcity has been ravaging the economy after the price of crude oil, Nigeria’s main forex earner.

It crashed from $110 per barrel to around $44 per barrel from June 2014.

The nation’s foreign exchange reserves have been depleting since then.

On Wednesday, the country’s external reserves hit an 11-year low of $24.21bn, the latest data posted on the CBN website showed.

This means a limited amount of dollars will be available at the official interbank spot market, fuelling concerns over another round of depreciation of the naira.

The foreign exchange reserves fell by $600m in two weeks before shedding $1bn in four weeks, the CBN statistics showed.

An expert at Ernst and Young, Mr. Bisi Sanda, lamented on the dollar pressure on the economy.

He said the Federal Government needed political will to address the issues fuelling dollar scarcity on the economy.

He said, “The issue of dollar is very important to the economy. It is predicated on the fact that we are a dollar-denominated economy. It appears the government is still begging issues as far as the import-dependent state of our economy is concerned.

“We need to fix issues, we need to go back to the drawing board. The CBN said between 2010 and 2016, a total of $11bn was sold to the Bureaux De Change annually. We need to plug leakages in this area.”

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

Banking Sector

Central Bank of Nigeria Postpones 293rd Monetary Policy Committee Meeting

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The Central Bank of Nigeria (CBN) has announced the postponement of its 293rd Monetary Policy Committee (MPC) meeting, originally scheduled for September 25th and 26th, 2023.

Dr. Isa AbdulMumin, the bank’s Director of Corporate Communications, released a statement on Thursday confirming the decision.

In the statement, Dr. AbdulMumin stated, “The Monetary Policy Committee of the Central Bank of Nigeria has deferred its 293rd meeting, which was initially planned for Monday and Tuesday, September 25th and 26th, 2023, respectively. A new date will be communicated in due course. We regret any inconvenience this change may cause our stakeholders and the general public.”

While the CBN did not provide an official reason for the postponement, some industry experts suggest it may be related to the pending approvals for the newly appointed governor and deputy governors of the bank.

President Bola Tinubu recently nominated Yemi Cardoso as the potential head of the CBN. Additionally, Tinubu has endorsed the nominations of four new deputy governors for the apex bank, who are expected to serve for an initial term of five years, pending confirmation by the Senate.

The nominated deputy governors are Emem Usoro, Muhammad Abdullahi-Dattijo, Philip Ikeazor, and Bala Bello. However, the appointment of the CBN governor is contingent upon Senate confirmation, which is currently on a yearly recess.

The CBN assures stakeholders and the public that the rescheduled MPC meeting date will be communicated promptly as soon as it is confirmed.

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Banking Sector

Currency in Circulation Surges by N1.7 Trillion Amidst Rising Cash Transactions

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New Naira Notes

The currency in circulation in Nigeria has surged by N1.7 trillion, driven by a surge in cash transactions.

According to data obtained from the Central Bank of Nigeria (CBN), as of the end of August, the currency in circulation rose to N2.7 trillion.

This substantial increase in currency in circulation comes after a 235.03 percent dip to N982.1 billion as of the end of February 2023 from N3.29 trillion at the close of October 2022, primarily due to the naira redesign policy spearheaded by the CBN.

However, the currency in circulation began its steady ascent once the policy concluded. Cash that had been previously withdrawn from circulation to promote electronic payments was reintroduced into the economy, contributing to this significant boost.

The data obtained from the CBN reveals that a whopping N2.3 trillion was removed from circulation during this period.

The CBN defines currency in circulation as all legal tender currency in the hands of the general public and within the vaults of Deposit Money Banks, excluding the central bank’s vaults.

The CBN further elucidated its methodology, stating that it employed an “accounting/statistical/withdrawals & deposits approach” to calculate the currency in circulation in Nigeria. This approach meticulously tracks the movement of currency in circulation on a transaction-by-transaction basis.

Under this methodology, each withdrawal made by a Deposit Money Bank at one of CBN’s branches results in an increase in currency in circulation (CIC), while each deposit made by a DMB at one of CBN’s branches leads to a decrease in CIC.

This surge in currency in circulation reflects the evolving landscape of financial transactions in Nigeria and underscores the importance of flexible monetary policies in facilitating economic growth and stability.

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Banking Sector

Strong Growth in Earnings for Leading Nigerian Banks in H1 2023

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Financial reports released by eight Deposit Money Banks (DMBs) for the first half of 2023 have showcased robust financial performances, collectively amassing N3.9 trillion in gross earnings.

These figures were recently disclosed through the financial statements published on the Nigerian Exchange Limited’s website.

Zenith Bank: Zenith Bank, in its audited results for the half-year ending on June 30, 2023, stood out with remarkable growth, posting a 139 percent surge in gross earnings. This figure soared from N404.8 billion in H1 2022 to N967.3 billion in H1 2023.

The bank also reported a 161.84 percent increase in profit after tax, reaching N291.7 billion by June 2023.

Guaranty Trust Bank (GTCO): GTCO recorded a substantial 85 percent rise in gross earnings during H1 2023, soaring to N672.603 billion from the N364.306 billion recorded in the previous year.

In its audited consolidated and separate financial statements filed with both the Nigerian Exchange Group and London Stock Exchange, the bank reported a profit after tax of N280.482 billion for H1 2023, compared to N77.557 billion in the corresponding period of 2022.

United Bank for Africa (UBA): UBA demonstrated its financial prowess with a remarkable 164 percent increase in gross earnings, reaching N981.78 billion in June 2023, compared to N372.36 billion in June 2022.

According to the bank’s audited financial report, its profit after tax surged to N378.24 billion, reflecting a staggering 437.8 percent increase over H1 2022.

First Bank: Nigeria’s oldest bank, First Bank, experienced substantial growth in gross earnings, witnessing an 82.8 percent increase to N656.6 billion in H1 2023, compared to N359.2 billion in the same period of 2022.

The bank’s profit after tax also saw significant growth, increasing to N174.9 billion in H1 2023 from N53.3 billion in the previous year.

Also, other prominent banks that recorded substantial growth in gross earnings in the first half of 2023 included Wema Bank (N89.09 billion), Fidelity Bank (N247.1 billion), Sterling Holding (N99.06 billion), and FCMB (N238.2 billion). Cumulatively, these eight banks collectively amassed N3.9 trillion in the first six months of the year.

A deeper analysis of these banks’ financial statements indicated that the impressive performance in the first half of the year was primarily attributable to the devaluation of the naira following the Central Bank of Nigeria’s decision to float the local currency.

For instance, Zenith Bank’s interest income surged by 72 percent, reaching N415.4 billion in H1 2023 from N241.7 billion in H1 2022. Additionally, trading gains rose by 21 percent to N103 billion during this period.

The growth in interest income was attributed to the impact of both the expansion and repricing of risk assets.

“The liberalization of the foreign exchange market during the period spurred the growth in non-interest income as revaluation gains improved significantly,” noted the bank.

These impressive financial performances underscore the resilience and adaptability of Nigerian banks in the face of economic challenges and changing market conditions, positioning them as key players in the nation’s financial landscape.

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