Back in June, the Central Bank of Nigeria (CBN) imposed a raft of new foreign exchange controls, denying importers access to foreign currency to buy items such as rice, soap and cement.
This followed an April decree that placed a limit on the amount Nigerians could spend on their credit cards while abroad or while paying for services overseas.
These new foreign exchange controls were imposed to try to stem the flow of dollars out of the country, with the naira plummeting in value as oil prices fall.
Fair enough, or so it sounds. Yet the new regulations are reaping havoc in unforeseen ways, and hurting Nigeria’s growing tech startup ecosystem. The country’s retail banks have been forced to buy dollars from the CBN to settle international payments made by their customers. And, as a result, banks are adjusting downwards the limit individuals can spend using foreign currency.
You can just imagine the implications for internet companies. Social media has been awash in recent weeks and months with Nigerians complaining about the new limits, and seeking ways around them. Of course it has. Just think of the amount of internet entrepreneurs in the country paying for Facebook adverts, MailChimp subscriptions, or GoDaddy hosting online using their debit cards. They have been hamstrung.
In this way, regulations that were designed to curb imports of Indian incense and rubber products have seriously damaged what is one of the major emerging startup ecosystems in Africa.
“I discovered I could work around it by using the same card through PayPal. However, I almost ran into issues with MailChimp, which eventually told me they don’t accept a PayPal business account,” Aniche said.
If all else fails, Aniche said he would be forced to look for someone to pay for these services for him and receive naira in return, not something that would prove easy given the currency’s current decline.
Aniche’s problems are shared by a large number of Nigerians, currently taking to Facebook and Twitter to vent their frustration at their inability to pay for services that are crucial to their businesses. Many are openly considering switching to bitcoin, itself quite unstable, in order to overcome these issues. And limits continues to be readjusted almost daily.
A policy, therefore, that however well intended has backfired and is hurting one of the most exciting parts of Nigeria’s growing economy. A policy that needs to be amended before too much damage is done to the country’s startup scene.