As an individual or a business person, making and receiving payment in a foreign currency is easier done through the domiciliary account. Having a domiciliary account is very important especially in Nigeria where the economy is unstable, making it essential for people to save in a foreign currency as a way to protect their money from losing value.

A domiciliary account (sometimes referred to as a “Dom Account”) is a type of current account that allows you to make and receive payments in foreign currency. It accepts foreign currencies such as euros, dollars and pounds. The domiciliary account works like any other savings account. If it is a dollar account, the money will be sent in dollars, likewise Euro or pounds. You can also withdraw the foreign currency from your bank and either change it at bank rates in the bank or at the parallel market.

Why you should have a domiciliary account

Domiciliary accounts are important if you want to start receiving money from abroad. You can easily open a dom account with most Nigerian banks and with it, you can:

• Receive payment in foreign currencies (USD, EUR, GBP).
• Transfer funds abroad.
• Get attractive interest rates and hedge against inflation.
• Carry out both local and international transactions easily. This is a good option for people who do business internationally.
• Use it to buy products on any online platform.

How to open a domiciliary account in Nigeria

The requirements for opening a domiciliary account vary across different banks but are fundamentally similar. Here are the basic things that your bank will likely request of you.

• Referees: Two current account holders (preferably with the same bank) to sign the reference forms.
• Duly filled domiciliary account opening form.
• An existing naira account with the bank. It can either be a savings or a current account.
• Valid means of identification: either an international passport, permanent voters’ card, National ID card, or a driver’s license.
• Passport photograph.
• Utility bill issued within the last 3 months.

Various banks may require additional information from you but those listed above are the minimum requirements that will need to meet, for your dorm account to be created.

How to Use Domiciliary Accounts

The Central Bank of Nigeria (CBN) issued a circular on Monday clarifying how domiciliary accounts will be operated in the country. According to the CBN, domiciliary accounts used to deposits export proceeds (inflow from exports of goods and services from Nigeria) can only be used for business operations.

The directive also allows any extra funds remaining in the domiciliary accounts to be sold in the Investors and Exporters (I&E) Window, suggesting that the CBN is warning exporters not to sell their foreign proceeds in the black market.

This disclosure was made in a circular dated November 30, 2020, issued by CBN to all authorized dealers and the general public and signed by its Director for Trade & Exchange Department, Dr O.S. Nnaji.

On Export Proceeds

‘These accounts will continue to be operated based on existing regulations which allow account holders use of their funds for business operations only, with any extra funds sold in the Investors & Exporters window.’’

On other domiciliary accounts

“Where accounts are funded by electronic/wire transfer, account holders will be allowed unfettered and unrestricted use of these funds for eligible transactions. Where accounts are funded by cash lodgments, the existing regulations will continue to apply.”

The CBN also claimed it was issuing these clarifications in view of its “vastly improved capabilities of the CBN to monitor transactions, forestall money laundering and prevent the adverse effect of dollarization in Nigeria’s economy” which the CBN has frowned upon for years.

The CBN’s statement also alluded to the use of BVN in tracking compliance with its guidelines.

What this means

The latest regulations from the CBN appears to be directed at clarifying widespread information that there are plans for a clampdown of domiciliary accounts.

• For export proceeds, this circular appears to be warning exporters to use their forex proceeds for “legitimate” transactions and sell the rest in the I&E window instead of selling it in the black market.
• On Domiciliary accounts, the CBN is basically saying that inflows through electronic wires will be allowed for use by Nigerians for transactions deemed eligible. This means, if you received a foreign transfer into your account, you can use it to pay for transactions such as e-commerce payments or transfers to anyone at any time.
• However, for dollar cash deposits into your accounts, the central bank is reiterating that there will be restrictions on how that money used such as restricting it from direct transfers or even using it to pay for e-commerce transactions. These rules have existed for some time.
• Currently, a limit of $10,000 applies when you want to utilize foreign currency cash deposits.
• The central bank is basically dissuading the black market purchase of forex by limiting the number of dollars that can be purchased on the streets where forex is sold in the black market. However, the majority of black market transactions, particularly in dollar value are traded using wired transfers.

The 4 main types of bank accounts in Nigeria and what you need to know about them

 Chacha Wabara

Given the rapid urbanization taking place, along with the efforts of regulators to boost financial inclusion in the country, more and more Nigerians are opening bank accounts. In an effort to gain as much as they can of the market share, the commercial banks have taken their marketing strategy to the homes and offices of potential account holders in order to woo them to their banks. For any who is unfamiliar with the banking system, however, the various types of accounts they mention can be confusing. Here, we explain the major types of accounts and their features.

Savings Account

By far the most popular, the name of the account says it all. The main purpose of this account is to save up either for a project or just as backup for the future. Usually, everyone can apply whether as individuals or corporate bodies. As this is the baseline account, the perks are pretty baseline as well. Holders of this account will usually get access to ATM cards, online banking and other e-banking channels. Interest rate on the account is minimal, capping out at 5%.

It is also worthy to mention that under the savings account; banks have developed several products each with slight variations to the regular model. Different banks have different requirements with regard to opening balance, minimum operating balance. However, you can be sure of requiring a valid means of identification (National ID, International passport, driver’s license), a utility bill (Electricity bill, Water Rate bill, Tenement rate, Rent receipt) and passport photographs.

Current Account

This account was developed mainly to suit to needs of business owners who need third-party transactions on a regular basis. It is different from savings account in that withdrawals can be made by cheque, as such, third-party withdrawal is possible. Once again, under the current accounts, banks have several products which are meant to appeal to different sets of customers. These products have varying opening balances and operating balances but these are usually higher than those of the savings account.

Open to use for both individuals and corporate bodies, the account comes with more perks than the savings account. For example, there is usually no limit to number of withdrawals monthly and the account can be used as a basis for accessing loans and other bank services. In fact, some banks have an SME Current account product that is specifically tailored to suit entrepreneurs and their needs. With these extra perks come extra costs.https://b0b80165bad1abe5a67e6090538d213d.safeframe.googlesyndication.com/safeframe/1-0-38/html/container.html?n=0

Current accounts are usually charged account maintenance fees. This is in addition to maintenance charges for using any e-banking products such as the ATM. To open a current account, you need to be 18 years or older, have a valid means of identification as well as a utility bill as proof of address and complete signature specimen card(s).

Domiciliary Account

Also known as a foreign currency account, this type of account allows holders the privilege of transacting in dual currencies (Naira and another foreign currency). Most banks have options for only the dollar, euro and pound sterling however. This account type will most likely suit businesses and other corporates and few individuals who have regular business dealings in foreign currencies.

With domiciliary accounts, deposits can be made in the foreign currency of choice and there is usually no limit to the number of withdrawals. However, a flat charge is usually made on each transaction. In addition, for transfers made from foreign banks, holders of this account will be subject to a service charge in the foreign currency of choice. To open a domiciliary account, you must have passport photographs, utility bill, valid means of identification and a minimum opening balance which varies per bank and per foreign currency chosen

Fixed Account

Coming in different forms as well, the fixed account is primarily an investment account where a specified sum is invested for a pre-arranged period of time. In return for this, the holder is entitled to interest also at a rate agreed before commencement of the arrangement. The period agreed upon is called the tenor, which upon expiration, the holder will have the option of reinvesting the same sum at the same conditions (roll over) or cashing out the investment (liquidating).

However, if for some reason, the holder decides to terminate the agreement before the expiration of the tenor, he or she will lose accrued interest. Open to both individuals and corporates, the account holds appeal to those who have a lump sum they do not wish to use in the near future. The interest on the account serves as added incentive to investing their money in the bank. To open this account, you need passport photographs, valid means of identification and utility bill as basics.