In July 2021, Lagos-based software engineer Sodiq Lawal was working on a project for a fintech startup when the Central Bank of Nigeria suddenly discontinued the sale of foreign currencies to independent traders. The directive, issued to stop the illicit flow of foreign currencies, led to a surge in demand for foreign currencies. Soon, banks in the country reduced or discontinued international payments via domestic debit cards.

Lawal could no longer pay his monthly subscription fee for Amazon Web Services (AWS), which he needed for his project, using his naira card. By the time he figured out how to make the payment, his AWS subscription had become more expensive due to currency depreciation. Lawal was forced to limit the scope of his project to save server space and costs. “We removed some parts of the project” and rushed to make up for lost time, he told Rest of World, adding that this significantly reduced the project’s functionality.

Since 2021, Nigerian banks have significantly restricted the number of foreign currency transactions that local debit card holders can make. This has made it harder for Nigerians to make international payments for online subscriptions, shop on international e-commerce websites, and even get visas. Access to platforms like Apple Music, Spotify, Grammarly, and Prime Video has become more difficult. However, some international players like Netflix offer localized plans that naira cards can pay for.

Historically, these transactions were made through local debit cards, which allowed foreign transactions of up to $1,000 per month. Now, most banks limit foreign currency spending on domestic debit cards to just $20 a month. Many major banks, such as Access Bank, Guaranty Trust Bank, and First Bank, have completely cut out international spending options, leaving users to rely on virtual cards issued by fintech startups or prepaid dollar cards, which are hard to use given the country’s dollar shortage.

“I currently have ten fintech apps on my phone, possibly more,” Latifah Yusuf, a content writer based in Lagos, told Rest of World. Yusuf said she has to juggle several virtual cards to pay for her streaming subscriptions. The limitations also mean she can’t shop on AliExpress or pay for virtual courses and e-books, she said.

The limits have also increased costs for creators and tech professionals who have to pay for software and services in foreign currencies.

Oil is Nigeria’s primary source of foreign exchange. Since 2020, global reduction in oil prices coupled with the country’s debilitating oil production capacity has reduced its foreign currency income and, consequently, the amount of foreign exchange the government can make available for citizens who need to make foreign transactions. Nigeria’s foreign reserves also fell from $40 billion in January 2022 to $37 billion in December 2022.

According to Olowogboyega, the most significant drivers of the crisis are the central bank and the current federal administration’s insistence on fixed foreign exchange rates, despite them having insufficient dollars to decide what the market should be. “So the CBN’s wonky workaround has been controlling the demand for the dollar instead. It has led to numerous FX regulations that affect everyone,” he told Rest of World.

The situation has allowed fintech startups to provide prepaid virtual dollar card alternatives at significantly higher rates than banks. The exchange rate on a bank’s naira card went up to 450 naira per dollar, but on virtual prepaid dollar cards can sell for up to 850 naira a dollar. The price can also be volatile, increasing or decreasing depending on demand.

Fintech platforms are an undependable solution to the current problem, according to Lawal. In July 2022, several African fintech startups, including Flutterwave, Busha, Eversend, and GetEquity, stopped providing virtual dollar cards after Union54, an intermediary between the startups and Mastercard, had its bank identification number (BIN) temporarily suspended due to suspected fraud. This further drove up exchange rates on other platforms.

“The reality remains that the parallel market is where most people are going to continue getting their FX from since the CBN rates are not particularly accessible. In the end, [Nigeria’s] FX policies have been a disaster and have communicated fear, anxiety, and uncertainty,” Olowogboyega said.