For a number of years, the Nigerian financial sector has had some setback in the area of freedom of international transactions. First, it started with major financial services like PayPal disallowing their service in the country. Soon after, the Central Bank of Nigeria (CBN) started placing embargoes on foreign spendings. The use of naira debit cards for international transactions went along too. It started with a $100 limit on the maximum amount of spendings. Then, it was lowered to $20, and finally to nothing.
To carry out foreign transactions, one needed a dollar debit card, which is usually issued to users of domiciliary accounts. A domiciliary account is an account that allows Nigerians to receive, send and transfer foreign payments from Nigeria in a foreign currency. It can be in dollar, pound or euro. Many people resorted to using a domiciliary account designated in dollars for foreign transactions. They could spend without limitations even when users of naira accounts were being limited.
Then the ban started affecting domiciliary accounts.
Nigerians who work online leveraged the power and freedom associated with the use of a domiciliary account in Nigeria. They could receive money in foreign currencies and also spend the same in that currency. All they needed to do was to walk into a bank and request for their money. Near the beginning of 2023, the foreign exchange market in Nigeria started getting some buzz. Dollars, for instance, became scarce. Online transactions were delayed or cancelled even when they were initiated from a domiciliary account.
Thereafter, a limit on withdrawal was placed on all domiciliary account. At a point, DOM account users were given the option to withdraw their foreign currencies in the equivalent of the official bank rate in naira. However, with the new administration having settled in, several policies are being reviewed. One of such policies is the withdrawal limit placed on domiciliary accounts. Recently, the CBN made changes to its foreign exchange policies, with a particular focus on increasing the supply of foreign currency in the market and stabilizing exchange rates.
New withdrawal limit of foreign accounts is now $10,000 per day.
In a circular dated June 16, 2023, the apex bank announced an increase in the withdrawal limit on domiciliary accounts. The limit was set at $10,000 per week or per month depending on instructions from the mother bank. However, the new directive has now increased the withdrawal limit to $10,000 per day. The decision was made at a Bankers’ Committee meeting, where stakeholders discussed the implementation and implications of the policy changes. According to the bank, the goal of this directive is to improve the supply of foreign currency (especially dollar), discourage people from speculating, enhance customer confidence in the sector, and ensure overall market stability.
These changes in the industry are implemented as part of the CBN’s ongoing efforts to reform and strengthen the foreign exchange sector in Nigeria. By increasing the withdrawal limit on domiciliary accounts, individuals and businesses will be able to access foreign currency easily. This will facilitate international transactions and boost economic activities in the country. Under the leadership of President Bola Ahmed Tinubu, as well as former CBN Governor Godwin Emefiele, the CBN has been actively reviewing its policies to address issues in the financial sector.
Latest developments will reform the foreign exchange industry.
The increase in this withdrawal limit by CBN is a significant development in the ongoing efforts of the government to reform the industry. The policy aims to improve transparency, liquidity and price discovery in the foreign exchange market. This will eventually ensure that the market is stable and the supply of foreign currency is boosted. These reforms are vital for Nigeria’s economic growth, the country’s need at these dire times. People are also hoping that the new government is able to implement strategies that will favor all and sundry.