Deposit Money Banks have commenced a process to stop all customers from using their payment cards, popularly known as Automated Teller Machine cards, for dollar-denominated transactions when they travel abroad with effect from January 1, 2016.
SUNDAY PUNCH’s investigation also revealed the banks would not allow their customers to use naira-denominated ATM cards locally for transactions denominated in forex.
This means bank customers will not be able to use their cards to buy products from foreign e-commerce sites like eBay and Amazon.com in which payments are made in forex.
Already, Standard Chartered Bank has notified its customers that from January 1, 2016, they will not be able to use their naira-denominated ATM cards for transactions that are denominated in foreign currencies, either locally or when they travel abroad.
In a notice to its customers, Standard Chartered said, “This is to notify you that from January 1, 2016, your naira card will no longer be enabled for international use. This is as a result of the limited foreign exchange supply in the financial market.”
That was the sad news that ruined my yesterday evening. And when I read the comments below the Punch Newspaper post, it was obvious that many people seemed confused by this move of the CBN. And on LinkedIn someone asked: "Waoh, What is going on?"
I decided to give my 2 kobo and here it is.
There is only one thing the CBN is trying to protect: the foreign reserve.
It should stop using the outdated managed float exchange rate policy. Advanced countries freely float their exchange rate. If we keep pegging the dollar to N197, not even a $60 billion foreign reserve will save us. It will eventually run out. And all this demand control mechanism is not economically sound, just a way of pushing the inevitable forward.
I understand that Emefiele doesn't want the political pressure that will come with having the naira exchange at the prevailing market rate and let the foreign reserve be used for more strategic and nation building purpose. But this stopping all online payment denominated in foreign currency is economically more damaging and unsustainable.
A sound economy is built on trade. You focus on where your comparative advantage lies. Even if we try to build everything we need, it will take us decades to have high tech industries that build useable cars (not assemble them) or a mobile phone. And that is like going back to the stone age when everyone built everything he needed himself.
It's unfortunate that in these modern days, when other forward thinking countries are building capacity for high value industries and shifting low value production to other less forward thinking countries, our country is obsessed with going back to the 18th century when you avoid banks and governments.
We borrow to pay salaries and oil subsidy, instead of building infrastructure that will grow our production/economic capacity.
The only way to make things better is to improve the supply side. Give Nigerians constant electricity (even if you have to borrow from IMF to do it) and watch businesses rise and bloom. Make it easier for businesses to start and run, not increase taxes and fining the few doing well. Set up industrial research institutes and promote innovation, not funding snail business and poultry farming seminars for NYSC people (did they spend 5 years in Uni to go start snail farming?).
No country grows by sharing the nation's fortune among a few and transferring pain to the masses.