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Card Suspension: Banks Record Increase in Domiciliary Account Requests

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CBN
  • 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.

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

Crude Oil

Oil Dips Below $62 in New York Though Banks Say Rally Can Extend

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Oil

Oil Dips Below $62 in New York Though Banks Say Rally Can Extend

Oil retreated from an earlier rally with investment banks and traders predicting the market can go significantly higher in the months to come.

Futures in New York pared much of an earlier increase to $63 a barrel as the dollar climbed and equities slipped. Bank of America said prices could reach $70 at some point this year, while Socar Trading SA sees global benchmark Brent hitting $80 a barrel before the end of the year as the glut of inventories built up during the Covid-19 pandemic is drained by the summer.

The loss of oil output after the big freeze in the U.S. should help the market firm as much of the world emerges from lockdowns, according to Trafigura Group. Inventory data due later Tuesday from the American Petroleum Institute and more from the Energy Department on Wednesday will shed more light on how the Texas freeze disrupted U.S. oil supply last week.

Oil has surged this year after Saudi Arabia pledged to unilaterally cut 1 million barrels a day in February and March, with Goldman Sachs Group Inc. predicting the rally will accelerate as demand outpaces global supply. Russia and Riyadh, however, will next week once again head into an OPEC+ meeting with differing opinions about adding more crude to the market.

“The freeze in the U.S. has proved supportive as production was cut,” said Hans van Cleef, senior energy economist at ABN Amro. “We still expect that Russia will push for a significant rise in production,” which could soon weigh on prices, he said.

PRICES

  • West Texas Intermediate for April fell 27 cents to $61.43 a barrel at 9:20 a.m. New York time
  • Brent for April settlement fell 8 cents to $65.16

Brent’s prompt timespread firmed in a bullish backwardation structure to the widest in more than a year. The gap rose above $1 a barrel on Tuesday before easing to 87 cents. That compares with 25 cents at the start of the month.

JPMorgan Chase & Co. and oil trader Vitol Group shot down talk of a new oil supercycle, though they said a lack of supply response will keep prices for crude prices firm in the short term.

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Crude Oil

Oil Prices Rise With Storm-hit U.S. Output Set for Slow Return

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Crude oil

Oil Prices Rise With Storm-hit U.S. Output Set for Slow Return

Oil prices rose on Monday as the slow return of U.S. crude output cut by frigid conditions served as a reminder of the tight supply situation, just as demand recovers from the depths of the COVID-19 pandemic.

Brent crude was up $1.38, or 2.2%, at $64.29 per barrel. West Texas Intermediate gained $1.38, or 2.33%, to trade at $60.62 per barrel.

Abnormally cold weather in Texas and the Plains states forced the shutdown of up to 4 million barrels per day (bpd) of crude production along with 21 billion cubic feet of natural gas output, analysts estimated.

Shale oil producers in the region could take at least two weeks to restart the more than 2 million barrels per day (bpd) of crude output affected, sources said, as frozen pipes and power supply interruptions slow their recovery.

“With three-quarters of fracking crews standing down, the likelihood of a fast resumption is low,” ANZ Research said in a note.

For the first time since November, U.S. drilling companies cut the number of oil rigs operating due to the cold and snow enveloping Texas, New Mexico and other energy-producing centres.

OPEC+ oil producers are set to meet on March 4, with sources saying the group is likely to ease curbs on supply after April given a recovery in prices, although any increase in output will likely be modest given lingering uncertainty over the pandemic.

“Saudi Arabia is eager to pursue yet higher prices in order to cover its social break-even expenses at around $80 a barrel while Russia is strongly focused on unwinding current cuts and getting back to normal production,” said SEB chief commodity analyst Bjarne Schieldrop.

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Crude Oil

Crude Oil Rose Above $65 Per Barrel as US Production Drop Due to Texas Weather

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oil

Crude Oil Rose Above $65 Per Barrel as US Production Drop Due to Texas Weather

Oil prices rose to $65.47 per barrel on Thursday as crude oil production dropped in the US due to frigid Texas weather.

The unusual weather has left millions in the dark and forced oil producers to shut down production. According to reports, at least the winter blast has claimed 24 lives.

Brent crude oil gained $2 to $65.47 on Thursday morning before pulling back to $64.62 per barrel around 11:00 am Nigerian time.

U.S. West Texas Intermediate (WTI) crude rose 2.3 percent to settle at $61.74 per barrel.

“This has just sent us to the next level,” said Bob Yawger, director of energy futures at Mizuho in New York. “Crude oil WTI will probably max out somewhere pretty close to $65.65, refinery utilization rate will probably slide to somewhere around 76%,” Yawger said.

However, the report that Saudi Arabia plans to increase production in the coming months weighed on crude oil as it can be seen in the chart below.

Prince Abdulaziz bin Salman, Saudi Arabian Energy Minister, warned that it was too early to declare victory against the COVID-19 virus and that oil producers must remain “extremely cautious”.

“We are in a much better place than we were a year ago, but I must warn, once again, against complacency. The uncertainty is very high, and we have to be extremely cautious,” he told an energy industry event.

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