The past couple of months has witnessed a lot of policies and modifications to forex restrictions by the Central Bank of Nigeria (CBN). The drop in crude oil prices is responsible for the strict forex restrictions being implemented by the CBN.
When the drums of crashing oil prices got to a crescendo about nine months ago, the CBN responded with some harsh forex polices which is meant to regulate bank customers who were converting naira to dollar and depositing the proceeds in the hope that the dollar would continue to appreciate at the parallel and official markets.
The CBN in response to the trend decided to ban dollar deposits in Nigerian commercial banks. The policy may have brought a temporary solution to curtailing market speculators, but it has also impacted negatively on the economy because the restriction was not only killing businesses but had led to diversion of huge forex to neighboring countries.
Nigeria also came under intense pressure from the international market watchers as well as the International Monetary Fund (IMF) to relax the policy or face alienating Nigeria from its international trade partners and also calls from small businesses, manufacturing concerns, and political leaders.
The CBN yielded to the pressure in January and relaxed the restriction which enabled commercial banks to transfer foreign currency in customers’ domiciliary accounts to their local and international business partners subject to a daily cumulative limit of $10,000.
But that is not the end of the story as the CBN will later make another policy which states that a bank customer cannot withdraw dollar cash when the inflow come through transfer into a domiciliary account, but can only be paid cash if only they deposit cash.
Now for most bank customers this may not be a challenge but it is a problem to those who receive payments into their domiciliary accounts through wire transfers. Most especially online entrepreneurs who most often receive payment through this method.
There is a loophole in this process which commercial banks are exploring to maximize profit. An example is when a bank customer is purchasing goods using credit/debit cards, commercial banks usually use the parallel market exchange rate to convert the dollar to naira, making the customer to pay huge sum.
Also for those receiving wire transfer into domiciliary accounts, the bank will usually make use of the official exchange rate to convert dollar to naira, this way the customer gets less when selling dollar to banks and pay higher when buying from banks.
There are also some instances when a wire transfer can be made directly into a savings account, in this situation commercial banks use the official conversion rate.
In order to be on the safe side, it is recommended to accept dollar inflow into a domiciliary account, and then look for Bureau de change (BDC) operators who can accept a dollar transfers and exchange it using the parallel market exchange rate.
It could have been better if commercial banks are using same exchange rate when buying or selling dollar to their customers.