As naira cards become usable on dollar payment channels amid stiff competition from fintech, COLLINS OLAYINKA and HELEN OJI examine how the reinstatement of the essential service could ease pressure on the parallel market, enhance transaction convenience for individuals/small businesses as well as the urgent responsibility before the Central Bank of Nigeria (CBN) in sustaining improved liquidity.

Although the re-entry of naira cards into the international payment system was not announced with fanfare, the return has elicited enthusiasm among Nigerians. The cross-border payment service, which has been announced by some banks in the past two weeks with the rest expected to join in the days ahead, will further reduce the pressure on black market transactions, narrow the market arbitrage, which is already less than the global acceptable five per cent and ease international transaction settlement for business and personal travellers.

No doubt, the listing of naira-denominated cards as international payment channels comes on improved liquidity, which rose 62 per cent month-on-month to $5.96 billion in May. In a recent note to investors, analysts at Financial Derivatives Company Limited attributed rising foreign exchange (FX) earnings to a surge in oil prices and multiple inflow channels created by the apex bank.

The banks are not only going to competing among themselves in global payment space. There are dozens of fintech firms created to take advantage of the loophole with some becoming household names in payment. But what the naira cards bring to the table include ease of use and offline advantage.

The potpourri of announcements come about two years after the rate unification and pro-market reform that reduced the premium on the black market, which touched 100 per cent during the 2023 general election primaries, and triggered a major reset of the market. The CBN followed up with operational efficiency measures to address long-standing obstacles weighing on exchange rate stability. Whereas the naira has lost over 60 per cent of its value in the past two years, market arbitrage has reduced to almost zero, eliminating manipulative trading, while liquidity has improved drastically.

On the strength of the FX and fiscal reforms, including subsidy removal, Nigeria successfully returned to international capital markets in December and was recently upgraded by different rating agencies. With the increase in the activities of local refineries, FX inflow has firmed up leading to a sharp reduction in the rate volatility index in the past one year. Year-to-date, for instance, the naira has gained a modest four per cent against the dollar.

Analysts have hailed the resumption of cross-border transactions on naira cards, which was suspended at the height of the post-COVID-19 currency crisis, as the latest gain of the hard reforms of the past two years. The benefits of market liberalisation policy, experts have suggested, could only be limited by the extent of collaboration between the fiscal and monetary authorities.

Before the eventual suspension of the usage of naira cards for international payments, illiquidity was a major challenge. The CBN, for one, struggled to meet the rising FX demand amid rising artificial requests, hoarding of dollars, failing oil revenues, declining reserves and general dumping of naira assents.

Excessive demand for the dollar via card usage also contributed to the naira’s free fall and widened the gap between the official and parallel markets. Hence, experts said the new CBN’s responsibility, in this regard, does not stop at improving liquidity and ensuring the ‘globalisation’ of naira cards but extends to building a robust regulatory framework around cross-border payment service to ensure the old abuses do not return.

Indeed, with market arbitrage averaging two per cent in the past six months, there is less incentive to use payment cards for round-tripping. Last week, the exchange rate closed at N1528/$ at the official market while the naira traded around N1550/$, translating to an unofficial market premium of 1.4 per cent.

In some weeks in recent times, both markets tie on the same exchange value. Except the trend breaks down going forward, round-trip transactions, whether online or offline, are not rational for traders. For now, this is a strong safeguard against possible abuse of the naira card international usage. But should market dynamics change, the apex bank would need new mechanisms to tame excesses of both unethical bankers and their greedy customers, who may desire to exploit the card for rent-seeking.

Another window for liquidity recovery
Prior to its suspension, naira-denominated debit cards served as a critical bridge between Nigerians and the global digital economy. The cards enabled thousands of individuals, students, freelancers, entrepreneurs and everyday consumers to make small yet essential foreign currency payments. From settling international exam fees and paying for online courses to subscribing to streaming services and cloud-based tools, the cards made global access seamless and affordable within regulated limits.

The abrupt halt of the service left many stranded, cutting off an important channel for routine global transactions. In its absence, Nigerians were forced to explore alternative and often expensive means of accessing FX for personal use. These included opening domiciliary accounts that came with high minimum balance requirements, relying on virtual dollar cards that charged steep premiums or turning to the unpredictable black market, where exchange rates fluctuated wildly and posed a considerable financial risk.

The return of the cards is expected to promote financial inclusion via access to global payments as local merchants and individuals can now receive payments from customers or relatives abroad. Also, this incorporates the informal sector into the formal economy as small businesses that accept card payments become part of the formal financial system, improving credit access and regulatory benefits.

Nigerian techpreneurs can now receive and make payments for their online transactions. The adoption of international payment systems supported the rise of platforms like Paystack and Flutterwave while enabling local SMEs to participate in global commerce, with positive consequences for increased foreign investment, job creation and growth of the economy.

For many Nigerians, especially those whose livelihoods depend on affordable and seamless cross-border transactions, the return of naira card usability is more than a banking update, it is a long-awaited relief. Indeed, over the past two years, freelancers, students, digital entrepreneurs and remote workers have faced significant limitations in accessing essential global platforms for learning, business and productivity. From renewing software subscriptions and paying for online certifications to purchasing digital tools and collaborating on international platforms, simple tasks became disproportionately difficult or expensive. Without access to naira card-supported payments, users were pushed toward inefficient and costly alternatives, including virtual dollar cards with inflated exchange rates or navigating.

The reactivation of naira card usage, albeit with monthly caps, provides some relief. Even minimal access to foreign transactions means greater ease, lower costs and reduced dependence on informal FX sources. Beyond the practical benefits, the move also carries psychological weight, signalling that Nigeria’s financial system is beginning to realign with the needs of the everyday consumer, which would go a long way in easing panic buying.

However, if this is not properly managed, risks such as increased official FX demand, higher import consumption, possible FX mismatch, and outflow of FX for non-essential items, may increase demand pressure and expose the vulnerability of the local economy.

A cautious but strategic shift in optimism
Bringing their perspectives into focus, analysts view the move as a subtle but significant indication that Nigeria’s monetary authorities are regaining control over FX supply dynamics. They argue that while the limits on card usage remain low, the symbolic return of Naira cards points to a maturing FX regime, one working to balance stability with accessibility. The reintroduction is also expected to improve retail FX management, curb speculative demand and foster greater trust in the formal banking system as policy reforms begin to take effect.

In an analyst’s note, the head of financial institutions ratings at Agusto & Co, Ayokunle Olubunmi, said improved FX liquidity supported banks’ decision to reactivate their naira cards for global transactions.

“The moderating premium on the parallel market transactions and the reduced arbitrage opportunities is also responsible for the decision,” he said. Senior Economist at Comercio Partners, Abiodun Ajayi, describes the reactivation as a soft indicator that FX conditions, while still tight, are improving.He linked this development to a more disciplined monetary stance and increased transparency around FX flows.

Toward financial reconnection
The Head of Research at Meristem Securities, Tolu Adeniran, also said: “It is a micro-level shift with macro-level implications. Giving consumers an alternative to the black market, even temporarily, helps narrow the rate gap and cool speculative pressures. But the key is sustainability.”

He added that for the measure to make a lasting impact, it must be backed by strong policy consistency, growing reserves and structural reforms that address Nigeria’s underlying FX vulnerability, especially its overreliance on imports and limited export diversification.

A macroeconomist at Afrinvest Advisory, Kemi Shonibare, described the card reinstatement is part of a wider shift in policy tone, saying: “This is a low-risk, high-visibility intervention that restores a degree of confidence. But until FX supply becomes stable and predictable, it remains a tactical, not transformational fix.”

An investment banker, Tolulope Alayande, believed the return is a welcome development for many individuals and businesses. He recalled that when previously in use, the cards made overseas spending easier, reduced pressure on the foreign exchange market and connected Nigeria more closely to the global economy.

“Before the suspension, Nigerians could pay for goods and services abroad such as shopping online, booking flights or subscribing to global platforms directly from their local bank accounts. This made spending abroad faster, safer and more convenient without the need to carry foreign currency or rely on the black-market exchange.

“The card system helped reduce the demand for foreign exchange in the black market. Instead of people going to informal money changers, banks handled small FX needs for card payments transparently. This supported efforts to stabilise the naira and maintain control over Nigeria’s limited FX supply. It also helped the CBN and financial institutions track and manage foreign spending more efficiently, ensuring FX was used for genuine personal and business needs,” he said.

He added that if card use abroad continues smoothly, it could further support Nigeria’s participation in global trade and the digital economy, saying banks would need to access more FX to settle international transactions, which could increase pressure if not well managed.

A retired banker, Dr Yunana Bature, noted that to sustain the resumption, Nigeria will need to boost its FX reserves, expand exports beyond oil and maintain clear, consistent currency policies.

The return of naira cards for foreign transactions may not resolve Nigeria’s forex troubles overnight. However, it is a timely and symbolic gesture, one that offers immediate relief to consumers, sends the right signals to the market and fits into a broader framework of rebuilding trust in the formal FX system.

If sustained and gradually expanded, this policy could serve as a meaningful part of the FX recovery puzzle, one where Nigerians are no longer locked out of the global economy for want of $10, and where confidence in the Naira can finally begin to return.