As foreign reserve faces severe pressure from depleting crude oil revenue, Nigerian banks are initiating new measures to stem the impact. One of these measures is cut in customers’ spending abroad.

The need for this decision is further reinforced by the coronavirus pandemic and a slump in oil prices that have triggered concerns of likely shortage of the U.S. currency.

Guaranty Trust Bank Plc, the country’s biggest lender by market value, reduced international spending limits on its naira-denominated cards to $500 from $3,000 last week, while Zenith Bank Plc reduced the limit to $1,000 from $3,000. Renaissance Capital expects others to follow as the companies try to conserve dollar liquidity.

It’s a “precautionary measure as we do not know how long oil prices will remain low,” Adesoji Solanke, a director of frontier and sub-Saharan banks equity research at Renaissance Capital in London, said in emailed response to questions. “There is a fair probability that the central bank opts to contain the depreciation of the naira, which implies there is a real risk of some foreign-exchange restrictions being imposed.”

The Abuja-based central bank of Africa’s biggest crude producer devalued the local currency by 4% to 380 per dollar this month as prices for the commodity plunged. Afrinvest West Africa expects the devaluation is not enough to ease pressure on the local currency and is forecasting an exchange rate of 400 naira to the dollar.

In 2015 and 2016 when the oil price and output crashed, the central bank introduced controls to reduce dollar demand, prompting many lenders to either cut or suspend foreign payments for customers using their naira cards.

That said, we expect the 2-week holiday to shift the demand for FX to the parallel market. Thus we expect an upward pressure in parallel market rates.

On the flip side, we think the 2-week break would help the CBN conserve scarce dollar resources, particularly in the face of sustained pressure in the I&E window owing to rising capital outflows. We note the CBN intervention in the I&E window jumped to a record high in March, as global risk aversion for EM/FM assets made FPIs cut their exposure to Nigerian assets.

Depleting reserves recently compelled the Central Bank of Nigeria (CBN) to discontinue its sales of foreign exchange to bureaux de change, advising them to source their foreign exchange from autonomous market.

-Bloomberg/Media Issues

http://www.mediaissuesng.com/business-news/depleting-dollar-forces-nigerian-banks-to-cut-customers-spending-abroad/

I just need it at #500/$....