Transacting Foreign Currency Denominated Real Estate Business in Nigeria

The Central Bank of Nigeria (CBN) in its recent press statement signed by the Director of Corporate Communications noted with dismay the increasing use of foreign currencies in the domestic economy as a medium of payment for goods and services by individuals and corporate bodies. Some institutions price their goods and services in foreign currencies and demand payments in foreign currencies not in Naira. The CBN cautioned against this practice and reiterated that same constitutes an offence and liable on conviction to a prescribed fine or six months imprisonment.

This write up therefore examines the legality or otherwise of the use of foreign currencies in property transactions in Nigeria. In addressing this issue, two pieces of legislation were called to aid namely; the CBN Act of 2007 and Foreign Exchange (Monitoring and Miscellaneous Provisions) Act (FOREX Act). The provisions of Foreign Exchange Manual (issued by CBN pursuant to FOREX Act) were also considered.

Legal tender is defined as “the money approved in a country for the payment of debts, the purchase of goods and other exchanges for value”. The CBN Act provides that Naira shall be legal tender in Nigeria at their face value for the payment of any amount. Any person who refuses to accept Naira as a means of payment is guilty of an offence and liable on conviction to a fine of N50,000 or 6 months imprisonment.

However, Nigerian law did not prohibit the use of foreign currency in local transactions. Thus, goods or services in Nigeria may be priced in foreign currency but the vendor or service provider is bound to accept Naira equivalent of same if the payer chooses to pay in Naira.

If the payer chooses to pay in foreign denominated currency (acceptable to the Payee) the payee can lawfully accept same. Under the FOREX Act, any person may open, maintain and operate a domiciliary account designated in foreign currency (any internationally convertible currency) with an Authorised Dealer (licensed bank in Nigeria).

In transacting business in foreign denominated currency, parties should transact within the ambit of the law otherwise will be guilty of an offence upon conviction. FOREX Act provides that no person in Nigeria shall make or accept cash payment, whether denominated in foreign currency or not, for the purchase or acquisition landed properties. Such payments (for acquisition of landed properties) shall only be made by means of bank transfers or cheques drawn on banks in Nigeria

Pursuant to the powers conferred on CBN by law to prescribe the circumstances and conditions under which foreign currencies may be accepted, the CBN issued a Foreign Exchange Manual which provides, among other things, that payment in foreign currency for products and services provided by a Nigerian company to another Nigerian company is optional. Thus, the option to pay in foreign currency rests with whoever is making the payment.

The Foreign Exchange Manual further provides that where a payer opts to make the payment in foreign currency, the funds shall be from his ordinary domiciliary account or offshore sources only.

In conclusion, Naira is the legal tender in Nigeria for payment of goods and services for any amount.

However, Nigerian entities/ individuals can price their goods or services in foreign currency but should be willing to accept the Naira equivalent of the said foreign currency. This is because a refusal to accept Naira as a means of payment constitutes an offence. A Vendor or a Service Provider may state its preference to be paid in a particular foreign currency but the discretion of paying in that particular foreign currency rests on the payer.

If the payer decides to pay in Naira, he is bound to pay the Naira equivalent of the foreign currency as at the time of making the said payment. If the payer decides to pay in foreign currency, the payment should be from his ordinary domiciliary account or from his offshore sources. Furthermore, all payments (whether in Naira or in foreign currency) for purchase or acquisition landed properties in Nigeria should only be made by means of bank transfers or cheques drawn on banks in Nigeria. Okonjo is the Chief Executive Officer, Fine and Country International (W.A), a multi-award winning international real estate network reputed locally and worldwide for its’ unique blend of intelligent and creative marketing and branding services, a solid market research and property investment advisory service coupled with a professional approach to corporate sales and leasing of premium commercial and luxurious residential properties.

With operations spanning over 300 offices worldwide; in the UAE, South Africa, Mauritius, Fine and Country International Realty has its head office located on Park Lane, Mayfair in the United Kingdom.