Is It Legal For Business Owners In Nigeria To Price Goods In Dollars?

There has been a concerted effort by Olayemi Cardoso’s led Central Bank of Nigeria (CBN) to stabilise the country’s currency. The naira, since President Bola Tinubu’s exchange rate reform, has been on a decline, reaching an all-time low in late January when it fell by over 30 percent in a single day.

Various reasons have been attributed to the ‘free fall’ of the naira. While addressing the House of Representatives on Tuesday, February 6, 2024, the Head of CBN indicated several factors that have contributed to the decline of the nation’s currency—from Nigerians spending $98 on medical trips and education to being susceptible to foreign goods and the drastic decline of crude oil remittance to the CBN.

“From 2003 to 2013, we experienced a surplus of $331.73 billion in the economy, with oil exports alone contributing over $798 billion. This surplus of dollars would typically stabilise the exchange rate, leading to a ‘strong’ naira,” Cardoso said, adding that while oil exports constitute over 90 percent of the country’s exchange earnings, it declined from $93.89 billion in 2011 to US$31.4 billion in 2020.

The apex bank has introduced some measures to stabilise the currency, including instructing commercial banks to limit their foreign exchange exposures through their Net Open Positions (NOP), as well as clearing all verified dollar backlogs owed to foreign airlines operating in the country. The measures, while further depreciating the naira, saw the official market almost converging with the parallel market for the first time.

In its latest measure, the CBN is cracking down on businesses and organisations operating in the country that demand payment for their goods and services in foreign currencies, particularly dollars.

“It has been observed that some institutions price their goods and services in foreign currencies and demand payment in foreign currencies rather than the domestic currency (the naira), which is the legal tender in Nigeria,” Ibrahim Mu’azu, the bank’s Director of Corporate Communications, said in a statement.

Similarly, the Economic and Financial Crimes Commission (EFCC), the country’s agency that investigates financial crimes, said it has raised a “Special Task Force in all its Zonal Commands for the enforcement” of what it called “extant laws against currency mutilation and dollarisation of the economy.”

What Is Dollarisation of Nigeria’s Economy?

In Nigeria’s context, dollarisation typically occurs when people, businesses, or even the government prefer to hold, transact, or save in US dollars due to concerns about the stability or value of the naira. Inflation, exchange rate volatility, or lack of confidence in the domestic currency, are some of the reasons why an economy is dollarized.

Due to exchange rate volatility, some Nigerian businesses are demanding dollars instead of the country’s currency.

Legal expert, Adeyemi Adebayo, told Neusroom that it’s illegal for businesses to charge in foreign currencies.

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“The naira is the legal tender for all forms of transactions in Nigeria. Thus, it’s illegal to charge for any business or service conducted in Nigeria in any other currency other than the naira,” she said.

This corroborates with Section 20 (5) of the Central Bank of Nigeria Act 2007, which states that any “person who refuses to accept the naira as a means of payment is guilty of an offence and liable on conviction to a fine or six months imprisonment.”

This, however, excludes foreigners, visitors, and tourists who are encouraged to continue using their cards for payment or exchange their foreign currency for the local currency.

Already, the EFCC said their operatives have arrested violators who issued invoices in dollars in Lagos and Port Harcourt, the capital of Rivers State. Also, proprietors of private universities and other institutions of higher learning charging fees in dollars have been invited by the Commission.

“The Commission is committed to the enforcement of all laws in place for the reflation and stimulation of the economy,” the Commission said.