Guy, how far? All the papers this morning are reporting that CBN has banned the importation of foreign exchange? I know we import a lot of things in Nigeria, but we dey import money before?

Don’t mind our newspapers. Because of the way the word ‘ban’ is used in Nigeria, people will read the papers and think you are no longer allowed to bring forex into the country. That’s not the case.

So wetin happen? Because you dey talk, your mouth dey move but I no hear anything o

Well the CBN announced 5 new forex policies last week. So its not just a case of something was banned or not

[Grabs chair] Oya start from the first one furstofall

Firstly it has suspended the system it used to sell forex to the banks. It was known as WDAS. This has now been replaced by RDAS

Wada Nas? That Abacha Special Duties guy still dey?

WDAS means Wholesale Dutch Auction System. A bank will collect requests from its customers who want to purchase forex. It will then take the total amount to the auction where CBN will sell the forex to them. For example, 100 customers of a bank might say they want $100,000 each. The bank will then go to the auction hoping to buy $10m from CBN. But CBN used to sell a certain amount of money every week and there would be plenty banks competing (with their customers’ requests) competing for the forex on offer by CBN.

So the only way for CBN to sell the forex is through an auction system. It will offer the money at a certain price say N160 to $1 and anyone who wants to buy at that amount will buy or it will reduce its asking price to N158. Until all the money on offer is sold. The auction holds every week and the CBN announces how much it will be selling in advance. For example, the CBN offered $400m in the last auction in September

This thing be like market. How come I never knew about it? Na coded something? I for like go hustle see if I fit buy dollars na

Notice the name is ‘Wholesale’? It is not an open market where anyone can come and buy. So only banks are allowed to come and buy on behalf of their clients.

So why are they changing it and to what?

The new system is RDAS – Retail Dutch Auction System. CBN is worried that the demand for forex is being driven by ‘fake’ economic activity especially money laundering and politicking. The RDAS is similar to the WDAS but now banks will have to ‘show their workings’ i.e. they will have to show the details of the person on whose behalf they are ordering the forex. In short, CBN will be collecting more information to enable it monitor what exactly is going on. In short it is tightening the rules on how forex can be bought.

So even as this one na retail, guys still no fit show there?

No

Ok, the second one

The second change is mainly for people who travel abroad and use their Nigerian debit cards to make payments and purchases. Previously the maximum you were allowed to spend on your Nigerian debit card outside the country in one year was the equivalent of $40,000. Now CBN has raised this to $150,000.

That one na for people wey get money to spend. No time abeg. The 3rd one

This is the one that has caused all the ‘ban’ headlines. In the past, authorised dealers were allowed to import foreign currency notes into the country as part of their business. This is what the CBN gave them the authorisation for. But now CBN is saying ‘even though we have authorised you to import forex, you still have to tell us before you import the forex’.

In short, CBN doesn’t really trust the people it has authorised so it wants to micro-manage their operations. So authorised dealers now have to seek permission before importing. Of course this means that permission can be denied otherwise CBN won’t be doing this.

Now they will have to fill an application form and send it to Abuja for approval. This will obviously cause delays and a lot of paperwork so we have to wait to see how it works out

We like paper for this country sha. Why dem no fit use internet do all this kind thing? Me I no sabi use the thing but my 3rd born talk say nothing wey you no fit take internet do. Anyway, na dem know. 4th one?

This one is a bit confusing. Think of a hierarchy in how forex is bought and sold in Nigeria. At the top of the hierarchy is CBN. CBN sells to authorised dealers. Authorised dealers sell to Bureau de Change. Bureau de Change sells to regular people like you and me. Levels dey.

Currently ADs (authorised dealers) can sell a maximum of $250,000 per week to BDCs (Bureau de Change). Remember in the first point I mentioned that it’s the ADs who carry all the requests to the CBN auction? Now CBN has said that ADs have to carry out checks on the BDCs they deal with to make sure they are genuine. It has recently revoked the licences of 20 BDCs because it says they were being used for money laundering.

I’m guessing this means that if an ADs doesn’t check its BDCs and CBN finds something wrong, it can sanction the AD.

But what makes it slightly more confusing is that BDCs are now required to render weekly returns (more paperwork) on all the money they buy and sell directly to the CBN. So even though BDCs don’t deal directly with CBN, they still have to ‘show their workings’ to the CBN every week.

Hmmm…e be like CBN wan catch thief o? So if AD say ‘my BDC asked me to buy $10m for them’ and BDC submit return wey show say na only $5m dem collect, that is to say shirt don dey wear the AD be that?

Something like that….perhaps

E remain one more change abi how many we don talk now?

Yes, the final change is the one that affects you, me and everybody else directly. I believe one of your brothers is in America?

Yes e dey America. Wetin concern CBN with that one?

I am sure he sends you money through Western Union and you collect it in dollars? Now CBN has said you can no longer do that. When you receive money through Western Union or Moneygram or any other such service, you will only be able to collect the money in Naira. Previously, people would collect the amount in dollars and go and change it at a better rate by themselves on the black market.

[Tears Shirt] Say wetin happen?? The banks will now use this as an opportunity to cheat me! This Sanusi sef, na everything the guy see e go squeeze? Wetin we do am?

I am sorry about this and you are right, the CBN Governor appears to enjoy squeezing things but I’m afraid this policy is now in effect.

The bank will now pay you the money at the ‘Interbank Rate’ for that day. All banks have now been told to clearly display the daily exchange rates in the banking halls in a way that everyone can see it. So if you want to collect Western Union and you enter one bank and see N158 to $1, you can check two or three other banks to compare rates before deciding where to collect from.

The CBN says its Consumer Protection Department will make sure people are not cheated by banks but we wait to see how this works.

This thing don spoil my belle. I dey go abeg….sebi na 5 things you talk? Later

Sorry I counted wrongly, there are actually 6 changes and as a trader, this last one affects you.

I no even know who confuse pass between you and CBN. Oya wetin? If na bad thing, I no wan know o

I am sure you are familiar with e-Form M?

I don hear person mention am before…

It is the form filled by importers who want to pay their suppliers abroad by bank transfer. The maximum amount you can pay in this way is $250,000. The good thing about this is that you can do it online and just submit the invoice with it.

Going forward however, you will need to submit the shipping documents within 90 days of making the payment. Again, the CBN is tightening the rules to make sure that people don’t transfer money abroad in the name of buying goods that never arrive.


So I go send the high sea papers to CBN?

No, you will submit it to your bank (AD) but if you refuse to submit the shipping papers, the AD must report you to CBN or else it will be sanctioned.

So always make sure you submit the shipping papers to your bank as soon as you receive them so no one gets into trouble.

Ok guy, you don talk 6 now. I swear even if e remain, I no wan know. I dey go house. We go dey talk another time. Na kuku everyday these people dey change their rules.

I have finished



*This blog post was inspired the man who turns Micro-economics into a mass market commodity, Tim Harford.

I have unashamedly copied his style – imitation being the sincerest form of flattery and all that. His latest such post is here (for the UK).

FF

Culled from: http://aguntasolo.com/2013/10/02/tim-harford-explains-the-new-cbn-forex-guidelines/

Thank you very much. I believe everyone understands now.

this is so informative.love it.

very entertaining way of explaining the forex process

Kudos!

Really informative post.

Thanks a bunch!

I am sure some people will be looking for loophole in the system and how to still cheat the system...

This clearly explains the whole thing. Thanks!

Great thread, very detailed.

Thanks for sharing.

Odikwa very very risky sending forex to Nigeria and Emeka receiving it in Nira.

Good job man.

pickabeau1: very entertaining way of explaining the forex process

Kudos!

Nice write up... If FG go fit jux nake "Pingin" lingua franca for dis country. Easy assimilation of info will b guaranteed even in our skools...

Informative thread

@OP. Thanks for the info.
But come to think of it...all those money laundary warnings and CBN policies wch banks display everywhr in d banking hall na WASH!
When as a poliTHIEVian I will just arrange my boys to open a legitimate beaure de change, or get authorization/license to be importing forex, or better still use form-M and claim to pay for ordered goods abroad for importation (one of my boys will recieve it sharperly for Yankee), etc
Anyway...in Nigeria LAWS ARE MADE FOR THE POOR AND ORDINARY PEOPLE and not d CABALS!!! Am sure those thieves will alwys find a way(s) out
I will work hard to rise above the law in Nigeria***sobs***

Good one.

As an accountant who thinks he's intelligent and smart and up-to-date, it is so surprising to find things I have absolutely NO idea about!


Thank you very much sir
*Bookmarks Page*

nice

ogogoro:

WDAS means Wholesale Dutch Auction System. A bank will collect requests from its customers who want to purchase forex. It will then take the total amount to the auction where CBN will sell the forex to them. For example, 100 customers of a bank might say they want $100,000 each. The bank will then go to the auction hoping to buy $10m from CBN. But CBN used to sell a certain amount of money every week and there would be plenty banks competing (with their customers’ requests) competing for the forex on offer by CBN.

So the only way for CBN to sell the forex is through an auction system. It will offer the money at a certain price say N160 to $1 and anyone who wants to buy at that amount will buy or it will reduce its asking price to N158. Until all the money on offer is sold. The auction holds every week and the CBN announces how much it will be selling in advance. For example, the CBN offered $400m in the last auction in September

Notice the name is ‘Wholesale’? It is not an open market where anyone can come and buy. So only banks are allowed to come and buy on behalf of their clients.

So why are they changing it and to what?

The new system is RDAS – Retail Dutch Auction System. CBN is worried that the demand for forex is being driven by ‘fake’ economic activity especially money laundering and politicking. The RDAS is similar to the WDAS but[b] now banks will have to ‘show their workings’ i.e. they will have to show the details of the person on whose behalf they are ordering the forex.[/b] In short, CBN will be collecting more information to enable it monitor what exactly is going on. In short it is tightening the rules on how forex can be bought.


E remain one more change abi how many we don talk now?

I am sure he sends you money through Western Union and you collect it in dollars? Now CBN has said you can no longer do that. When you receive money through Western Union or Moneygram or any other such service, you will only be able to collect the money in Naira. Previously, people would collect the amount in dollars and go and change it at a better rate by themselves on the black market.

[Tears Shirt] Say wetin happen?? The banks will now use this as an opportunity to cheat me! This Sanusi sef, na everything the guy see e go squeeze? Wetin we do am?

[color=#990000]The CBN says its Consumer Protection Department will make sure people are not cheated by banks but we wait to see how this works.[/color]

Thanks for your breakdown. I hope it helps some people.

Has ANYONE gone to the bank to "BUY" Forex? ...say to pay for something? What response did they tell you?

Well, my friend has a Domiciliary accounts in "major currencies" in addition to Naira accounts thinking he can just BUY FOREX fro his bank and use it to pay (by Bank to Bank Transfer) for his purchases from 'abroad'.

He has maintained and funded his Naira account for some time now but the day he needed to buy some equipments from the U.K and needed to transfer GBP to the company's account in the U.K. he got a shocker!

We went to the bank together and he requested that they pay the U.K Company' s Bank (he has all the necessary Bank details of the U.K company with him) and then deduct the corresponding amount (using the bank's exchange rate) from his Naira account.

It was supposed to be a simple transaction. He showed them "PROOF" of the legitimacy of the equipments he was buying.

Well, not so simple!
The Bank (GTBank, but its virtually all of them doing this scam!) told him "We dont SELL FOREX".
My Cousin said he was not buying (as in collecting physical GBP cash but wants to "pay for goods" and its a direct transfer).

She went away, consulted Head of Forex, then consulted the Branch Manager and later they say they want to consult Head office in V.I, as my cousin sef no easy!

He wanted to know why he, as a legitimate customer, with a Dorm account cannot get service as advertised and sanctioned by the CBN.

To his surprise, one of the staff asked him to speak with a "RESIDENT ALHAJI FOREX DEALER" who hangs around inside the bank doing brisk business.

of course, the bank did advertise its :exchange rate" on a Notice Board on its wall (which is the official rate) but it is significant to note that that rate was far much more lower (You get more forex for your Naira or you pay less Naira for the same amount of forex) that what "Mallam" will give you.... within the same bank!

Eventually, they flatly refused to do the transaction for my cousin. They said "We dont sell forex to customers".
They called the Mallam and asked him to do business with him as it is still within the bank and they can guarantee that he does not even need to handle the cash: Just pay the "Mallam" the naira equivalent and we will do the rest, they told him. They said he should authorise a Niara transfer to the Mallam's GTB account for the equivalent amount.

As all these was going on, as an observer, l knew the SCAM that they were up to.
So, l took my phone and l started to record everything in VIDEO.
You will see their faces and that of the Mallam and all the "negotiations" as it was going-on inside the bank floor and how they were directing "forex customers" to this Mallam.

They simply collect Forex from CBN at a lower "official rate" and take it out of the banking system to sell outside, using the Mallams, to gain more money, depriving their official customers the benefit for which CBN sets-up this procedure.
It is called "ROUND -TRIPPING" and it is a form of SCAM/bank Fraud!

I am waiting for the opportuned time (on advice from my cousin who felt these criminals cold endanger his life just to protect their SCAM) ...to put the video on air at one of the foreign (or Channels TV) media..... and copy SANUSI himself.

The CBN Governor MUST ensure that banks are sanctioned heavily for refusing to perform their financial responsibility to the customer and for committing financial fraud, which is what ROUND-TRIPPING IS! There should be "jail time" for the head of forex (and l hear it goes all the way to the M.D) and everyone involved in this type of financial fraud

Even if CBN enacts 100-rules and dont want to, or cant or deliberately avoid enforcing them, its all rubbish.

I was really disappointed in GTBank but l understand its the same with ALL Nigerian banks, that is where they make most of their illicit money from.


Lastpage!

Nice one. I learnt some new tips. Thanks dude.

This is quite informative and easy to understand. I like this style!

@Lastpage, GTbank ceased selling forex to customers when it launched it's Naira mastercard, so I'd be mighty surprised if your friend had purchased same from them RECENTLY. In the past, he'd need not fund his domicilliary account to pay for "Invisible goods" or fees as the bank would just take the naira equivalent and render the payment on his behalf in the stipulated currency.

Secondly and more importantly, in case you missed it in the detailed extract by the original poster, the bank buys forex on behalf of BDCs, to which the "Mallam" probably represents or OWNS!

The bank could have told you politely that they don't sell forex and ces't fini. Your friend would probably get disgruntled, rant abit, blame EVERYONE else and that would be that.
TRAGICALLY, they offered you guys a lifeline, which you now see as a scam(rightly or wrongly...this one's for the judge), in order to complete the transaction. The perils of customer service....

How does this new policy affect those that work as expatriates outside the shores of Nigeria and get paid back home in Forex?

Do they still have access to their money in the currency in which they were paid or do they get the 'equivalent' in Naira?

Anyone with any idea?

Nice post. "following"
I've got a similar question to rusher14. I export goods and services and i get paid via T/T (Wire Transfer). Does the Western Union thingy apply to me? Do I get to withdraw my dollars? I just wanna know if my account officer is not playing karo with me.

I Received through Western Union today and I was given ₦159 by the Bank. That's not bad but you have to own an Account that's Older than 3 months in the bank that you're going to collect the money from but if you don't have an account in the bank, someone that has an account there has to Reference you and one girl was using it as a business inside the banking Hall. She will Reference you and you will give her like 10%. I was already expecting something like this.

Too long. Gonna save page

One way or another the chap practices will continue

Wow..tanx 4 takin ur time to brk down evry details into bits!..wouldn't av understood it if nt 4 ur detailed xplanation

CBN has now successfully broke the backbone of Travelex
Now autonomous bidding don die, na wao Mr Sanusi

darqly: @Lastpage, GTbank ceased selling forex to customers when it launched it's Naira mastercard, so I'd be mighty surprised if your friend had purchased same from them RECENTLY. In the past, he'd need not fund his domicilliary account to pay for "Invisible goods" or fees as the bank would just take the naira equivalent and render the payment on his behalf in the stipulated currency.

Now, this is what l call comparing "Apples & Oranges"!
a) He was not paying for "invisible goods" as you put. Read my post again, ...he was paying for "Equipments", ....Excavator, Digger and a JCB to be precise.

b) He has a GTB Master Card. I have one too and we use it to "do shopping" when we travel outside.
Are you by any stretch of imagination implying that he pays for a JCB or Digger with a GTB Master card?
I am talking about over 500,000 Pounds! Master "Debit" card is meant for small purchases, not importation of Equipments.
Such is done by "forex transfer" through a bank.

darqly: Secondly and more importantly, in case you missed it in the detailed extract by the original poster, the bank buys forex on behalf of BDCs, to which the "Mallam" probably represents or OWNS!

I think you're actually "missing it" big time. Re-read my post again.
A Bank is a bank, a BDC is a BDC!
BDC "sells" forex while a Bank "bids" for forex on behalf of customers.
You dont "operate a BDC" INSIDE a bank. We are not all totally naive not to know the difference now?

A bank can bid for forex "on behalf" of a BDC in which case, it will pass the forex to the BDC for it to do as it wishes, in its own office.
The same way, the bank buys forex on behalf of its "public customers" to FUND THEIR PURCHASES overseas, within the banking system.

Both are not the same thing but both are covered within CBN forex rules. (Even this as much is stated in the Op's post, read it again.

Dont offer opinion on what you dont have a clue about. Silence they say, is "golden"

I have discussed this issue with "seasoned bankers" and the trend of "informed opinion" is that it was wrong and against CBN rules.
They actually gave me a list of banks which have been in the past over this, at various times.

Google is your friend, type "Round tripping" and catch up on some reading.

darqly: The bank could have told you politely that they don't sell forex and ces't fini. Your friend would probably get disgruntled, rant abit, blame EVERYONE else and that would be that.
TRAGICALLY, they offered you guys a lifeline, which you now see as a scam(rightly or wrongly...this one's for the judge), in order to complete the transaction. The perils of customer service....

This rubbish can not be dignified with an answer, and that is putting it lightly.

Lastpage!

Tnx 4 dis information...i really like how you explained it in lay man language...very simple! God bless u

Great Thread.

lastpage:

Thanks for your breakdown. I hope it helps some people.
I
Has ANYONE gone to the bank to "BUY" Forex? ...say to pay for something? What response did they tell you?

Well, my friend has a Domiciliary accounts in "major currencies" in addition to Naira accounts thinking he can just BUY FOREX fro his bank and use it to pay (by Bank to Bank Transfer) for his purchases from 'abroad'.

He has maintained and funded his Naira account for some time now but the day he needed to buy some equipments from the U.K and needed to transfer GBP to the company's account in the U.K. he got a shocker!

We went to the bank together and he requested that they pay the U.K Company' s Bank (he has all the necessary Bank details of the U.K company with him) and then deduct the corresponding amount (using the bank's exchange rate) from his Naira account.

It was supposed to be a simple transaction. He showed them "PROOF" of the legitimacy of the equipments he was buying.

Well, not so simple!
The Bank (GTBank, but its virtually all of them doing this scam!) told him "We dont SELL FOREX".
My Cousin said he was not buying (as in collecting physical GBP cash but wants to "pay for goods" and its a direct transfer).

She went away, consulted Head of Forex, then consulted the Branch Manager and later they say they want to consult Head office in V.I, as my cousin sef no easy!

He wanted to know why he, as a legitimate customer, with a Dorm account cannot get service as advertised and sanctioned by the CBN.

To his surprise, one of the staff asked him to speak with a "RESIDENT ALHAJI FOREX DEALER" who hangs around inside the bank doing brisk business.

of course, the bank did advertise its :exchange rate" on a Notice Board on its wall (which is the official rate) but it is significant to note that that rate was far much more lower (You get more forex for your Naira or you pay less Naira for the same amount of forex) that what "Mallam" will give you.... within the same bank!

Eventually, they flatly refused to do the transaction for my cousin. They said "We dont sell forex to customers".
They called the Mallam and asked him to do business with him as it is still within the bank and they can guarantee that he does not even need to handle the cash: Just pay the "Mallam" the naira equivalent and we will do the rest, they told him. They said he should authorise a Niara transfer to the Mallam's GTB account for the equivalent amount.

As all these was going on, as an observer, l knew the SCAM that they were up to.
So, l took my phone and l started to record everything in VIDEO.
You will see their faces and that of the Mallam and all the "negotiations" as it was going-on inside the bank floor and how they were directing "forex customers" to this Mallam.

They simply collect Forex from CBN at a lower "official rate" and take it out of the banking system to sell outside, using the Mallams, to gain more money, depriving their official customers the benefit for which CBN sets-up this procedure.
It is called "ROUND -TRIPPING" and it is a form of SCAM/bank Fraud!

I am waiting for the opportuned time (on advice from my cousin who felt these criminals cold endanger his life just to protect their SCAM) ...to put the video on air at one of the foreign (or Channels TV) media..... and copy SANUSI himself.

The CBN Governor MUST ensure that banks are sanctioned heavily for refusing to perform their financial responsibility to the customer and for committing financial fraud, which is what ROUND-TRIPPING IS! There should be "jail time" for the head of forex (and l hear it goes all the way to the M.D) and everyone involved in this type of financial fraud

Even if CBN enacts 100-rules and dont want to, or cant or deliberately avoid enforcing them, its all rubbish.

I was really disappointed in GTBank but l understand its the same with ALL Nigerian banks, that is where they make most of their illicit money from.


Lastpage!

In as much as your post serms revealing, it suffers depth and critical reasoning while being highly skewed when analysed by those who know the workings of the banking system.
In Nigeria people hardly take time to read through documents before consumating transactions. Therefore they most likely would come back claiming ignorance of points clearly stated out in the documents executed. Hence the popular saying that 'if you want to hide something from a blackman, put it into writing'.
My dear friend, foreign transaction (trade) differs from local purchase in many ways.
If your friend had taken time to go through the domiciliary account form he filled to open his account, he would have cleatly read where the bank states that the customer is responsible for funding such accounts by means other than 'over the counter purchase'.
If your friend wanted the bank to purchase and make payments for him, certain documents yo evidence the trade cycle are needes (form m, pro forma invoice, insurance, ccvo, nafdac or SON certificate , validated TIN e.t.c depending on the type of transaction neing carried out). With these, the bank can debit your friends naira account and settle in any currency he so wishes it to be.
Banks pays school fees on behalf of their customers month in month out in similar ways by debiring local naira and settling the school abroad in any currency without the customer looking for 'mallams' to change currencies.
Depending on the mode of payment required by your friend's busines partner (either T/T or LC or ITLC), would also affect the bank's level of involvement in sourcing your foreing fumds for you.
However, you made good points here. The bank staff are meant to educate your friend on why they cannot pay straight from his account due to the duocuments he tendered while advising him to source for hard currencies from the parrarel market (if he cannot provide sufficient documentation to enable the bank buy on his behalf).
Direct involvement by the staff with these 'mallams'
Would decrease customer confidence with such bank. In most banks this is a greviuos offence punishable by dismissal as it makea the banks loose income and integrity.
You may warn such staff to desist from such actions or threaten to report him to management and you would see his response as such actions are carried out by staff for the personal kickbacks from these mallams to the detriment of the bank.
I have been in this business both as a banker and importer, and have worked closely with GTBank recently in my business (and have been so satisfoed with the international trade procedures)thus the above analysis.

Kindly desist from sentimental reportage, ask more queations, read terms and conditions better while asking for its interpretation from experts and please note that international yrafe is very complex and you may nees an expert to guide you through especially if you are new to it.
Wait until your goods get to the nigerian ports for clearing or customs part, then you would conclude that the bankers are indeed saints....lol!!!!
Peace!!!!