Banks and businesses organisation are the worse hit by the continued dollar scarcity in the economy, Futher more, analysts have said that, Nigeria is facing one of its biggest dollar crunch in recent years with the impact hurting critical sectors of the economy.
Banks have cut access to dollars for individuals and businesses as the foreign exchange scarcity poses long-term risks to markets.
The foreign-currency shortage has pushed the economy to the edge.
Already, banks have stopped honouring card payments making it difficult for many foreign investors to get their money out. Manufacturers are also unable to import vital raw materials as output hurtles toward a second contraction in four years.
Relying on oil exports for half of its revenue, the Federal Government’s coffers have emptied after crude prices plunged in the wake of the coronavirus pandemic.
There is also little prospect of a respite any time soon as Nigeria needs oil prices of $70 per barrel and daily production of two million barrels to balance its budget, but prices hover around $40 and OPEC curbs have restricted the nation’s output to about 1.4 million barrels a day.
The evaporation of foreign income has forced the Central Bank of Nigeria (CBN) to halt weekly interbank foreign-currency sales since March. Now the effects of the dollar shortage are seeping through to the economy.
“A lot of the members can’t access the amount of dollars they need from the banks,” said Eke Ubiji, executive secretary of the Nigerian Association of Small and Medium Enterprises.
GTBank, has cut the amount of foreign currency customers can spend on payment cards abroad to $100 a month from $3,000. Rules on what companies do with the dollars they receive have also been changed, said Emeka Mgbeahuru, who runs Tropitec Ltd., an importer of agricultural equipment from Italy and China with distribution links across West and Central Africa.
In emailed notes to customers, First City Monument Bank served a notice on some adjustments.
The bank said: “Please, be informed that the monthly spending limit on your FCMB Naira Mastercard/Visa card has been reviewed further from $300 to $100.
“This means you can only spend $100 or its equivalent monthly for international transactions, available only for POS and Online transactions (ATM cash withdrawal abroad has been suspended).
“If you require higher international spending limit, we encourage you to apply for a foreign currency card (Domiciliary Account required).”
The International Monetary Fund (IMF) predicts Nigeria’s economy will contract by 5.4 per cent this year, the most in four decades. The latest official job figures put the second-quarter unemployment rate at 27.1 per cent, the highest in a decade.
“When you source your own dollars, they won’t let you pay in cash into your account and won’t let you transfer to your suppliers,” Mgbeahuru said.
Many banks are following a template they used when they went through a similar contraction in 2016, which was to cut customers’ foreign payments and wait for crude prices to recover before raising the limits.
“The challenge with dollar liquidity is an industry-wide problem,” said Bridget Oyefeso-Odusami, a spokeswoman of Stanbic IBTC Banks, which cut its customers’ card spending to $500 monthly.
The shortage of foreign currency is forcing some companies to consider closing down, said Ubiji.
“If that happens, it has a ripple effect, which is loss of jobs. We wish the situation changes for the better”, he said.