Perhaps there’s no greater evidence of how the US dollar signals socioeconomic status than the frequency with which it appears in Afrobeats lyrics and videos. Like everything about Nigeria, no one is patriotic about the naira. Since I was born, the naira has been in a tailspin of devaluation owing to poor economic policies and the detrimental conditions the World Bank and other international financial institutions give to us each time we approach them for loans. The naira is so weak the goal for every Nigerian is to earn in dollars, either through some remote gigs, japa-ing to the US, or scamming Oyinbo* people on the internet.
The demand for USD has consistently outweighed its supply, unfortunately. I’m not an economist. But I guess the reason for this imbalance is because our import outweighs our export. And since the US dollar is the currency of international trade, our low export earnings determine our low forex earnings. This paltry dollar revenue has led to what I call the Bureau De Change industrial complex; a forex black market, if you will. It’s pointless going to the bank to change your naira to the dollar. Almost always, our banks do not have any forex to sell. In fact, if you want to say fund your domiciliary account, your bank most likely will refer you to buy forex from the black market and then bring it to fund your account.
But there is a huge problem with patronising the BDC market. They charge almost twice the official CBN exchange rate. As of the time of writing this, $1 exchanges for N460 according to the CBN official rate. But it sells for N765 on Aboki Forex. Depending on the flow of currency mutation, Nigerians are either glad or sad that the naira continuously dips against the dollar.
In recent years, the CBN has come up with some policies to help stabilise the Naira. But none has yielded any success in the face of our multiple exchange rates. The most recent and the most painful was the ban on naira cards from international transactions. The CBN had been at it for a while though. Incrementally, it reduced monthly international transactions on naira cards. I remember in 2020, I paid over $100 to host my then satire website, Daily Guffaw, on HostGator, an international hosting service. I used my naira card of course and I had no issues. A year later, the CBN reduced monthly international transactions on naira cards to $50. To renew my domain and hosting, the only workaround was for me to contact HostGator to split my invoice so I could use two different naira cards.
A year after the renewal, the CBN reduced the monthly limit to $20. And in December last year, it banned international transactions on naira cards. The ostensible reason for these incremental reductions and the subsequent ban is to buffer the naira amid a forex shortfall. The CBN governor, Godwin Emefelie at different press briefings and fora has blamed the BDC industrial complex for forex scarcity. In 2021, he announced the CBN would stop selling forex to BDC operators. But much remains to be seen how he has delivered on that threat. The BDC industrial complex is as strong as ever.
Almost six months after banning international transactions on naira cards, I’ve yet to see any practical reasons for it. If anything, the ban has made Nigerians more reliant on BDC agents because now, the only way you can carry out an international transaction is through a dollar card. And how do you fund it? You guessed right – BDC. What’s the point of threatening to withdraw BDC licences two years ago when we still cannot buy forex from commercial banks? What’s the point of banning naira cards at all if you still have to fund your dollar account with BDC dollars which costs almost twice the official rate?
The ban has led to the popularity of apps like Chipper Cash and Payday which provide virtual USD cards. Compared to dollar cards issued by commercial banks, these virtual cards are incredibly easy to get. Signing up doesn’t often include the rigmarole of presenting utility bills or some useless documents commercial banks often require. Your BVN and a government-issued ID are enough. But that ease of sign-up is just about the only advantage these alternative platforms have. Their exchange rates are more or less as expensive as black market rates. Recently, I’ve seen some complaints about Chipper Cash charging for failed transactions. Imagine having to migrate to Chipper Cash, pay exorbitantly for forex and then get charged every time you make a failed transaction. That’s a mess. You likely wouldn’t consider migrating there if the CBN did not ban forex transactions on naira cards.
Beyond how this ban is making more money for the BDC industrial complex, I should point out how it also limits Nigerians’ access to international goods and services. Simple things like Apple Music subscription or paying for Twitter Blue are now impossible. Unless, of course, you use expensive platforms like Chipper Cash. As more Nigerians opt out of these services, it disincentivises international businesses from considering Nigeria as a potential market for their product or service. For a developing economy that grovels to attract foreign investments, this is counterproductive.
The CBN has a knack for making Nigerians pay for its ineptitude. The recent Naira scarcity is a perfect example. Nigerians went through hell in the first three months of the year because the CBN poorly planned to introduce new notes into circulation. It almost brought the economy to a grinding halt. If the CBN acknowledges that the Bureau De Change industrial complex is a problem, why are Nigerians made to pay for its failure in curbing their excesses? Better yet, why should Nigerians be made to pay for the failure of the CBN to carry out its threat to withdraw BDC licences? The CBN needs to investigate itself and explain to us why forex is never accessible in commercial banks. In the meantime, a lot of Nigerians would appreciate a reversal of this ban on naira cards.
*Oyinbo is a Yoruba word for a Caucasian person.