Nigerian banks cut customers spending abroad on dollar concerns

More Nigerian banks may cut how much foreign currency customers can spend abroad as the coronavirus pandemic and a slump in oil prices trigger concerns the country might face shortages 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.