• Thursday, June 13, 2024
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What to know about domiciliary account

What to know about domiciliary account

The total balance in the domiciliary accounts in Nigeria’s financial institutions rose by more than a fifth in June, according to data from the Central Bank of Nigeria (CBN).

BusinessDay reported that the foreign currency deposits, a chunk of which are in dollars, stood at N17.65 trillion in June, up from N10.72 trillion in May, according to the CBN data. When converted to the greenback, it rose by 21 percent to $28.92 billion (using the average exchange rate of N610.17/$ in June) from $23.20 billion; the naira averaged 462.01/$ before the devaluation in mid-June.

Read also: Domiciliary account balance rises to $29bn amid weaker naira

What is a domiciliary account?

The domiciliary account is an account designed to enable a customer to send, receive or transfer foreign currency through a local bank.

The account is funded in pounds, euros, dollars and yen. You can carry out local or international transactions from the comfort of your home, office or abroad, according to Nigerian banks.

How does a domiciliary account work?

“If you render a service and you are paid in dollars, you need a domiciliary account to receive the payment,’ Muda Yusuf, chief executive officer, Centre for the Promotion of Private Enterprise, said.

“Any transactions you do in foreign currency can only be in your domiciliary account. If you want to wire money to import anything through your account, that will be done in a domiciliary account. If you want to import raw materials, you apply to a bank, the bank will not give you dollar, rather it will open a letter of credit for you, wire the money and pay the bank in naira.

He said a domiciliary account is opening a dollar or foreign currency account in a local bank.

If you are sent a dollar by your relative or a service you render, the money sits in your domiciliary account but if it is through money transfer operators, you could receive it in naira but some charges may apply.

Types of domiciliary account

Export proceeds domiciliary account

This account is operated based on existing regulations which allow account holders to use the funds for business operations only, with any extra funds sold in the investor & exporter (I&E) window, now the autonomous foreign exchange market (NAFEM).

Ordinary domiciliary account

This account is 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 lodgements, extant regulation will continue to apply, the CBN said in a circular.

Features of a domiciliary account

A domiciliary account allows you to withdraw cash in foreign currency from any of your bank branches. It also gives you room to transfer funds in foreign currency to other bank’s domiciliary accounts in Nigeria and abroad.

Read also: ‘Stabilising the Naira: A proposed policy to regulate domiciliary accounts in Nigeria (Afonomics)’ – Part 1

Requirements for opening a domiciliary account

You will need to get a domiciliary account form from your bank of choice, fill and sign it. You are required to provide a copy of the identification document (driver’s Licence, international passport, national I.D card, voter’s card or any other acceptable ID by the bank).

You are to provide one passport photograph, two completed reference forms, utility bill issued within the last three months, among any other requirements.

Who is eligible to open a domiciliary account?

According to the CBN, all authorised dealers such as banks are eligible to open domiciliary accounts for their customers.

Foreign currency domiciliary accounts may be opened by: citizens of Nigeria, foreign nationals, foreign/indigenous companies; embassies, high commissions, diplomatic missions, etc., operating in Nigeria including their staff. External account holders can also operate domiciliary accounts.

Can a customer maintain more than one domiciliary account?

A domiciliary account may be operated as a current, deposit or savings account.

A customer may open more than one domiciliary account denominated in the same or different foreign currencies and at the same or in different banks.

Any person making an application to open a foreign currency domiciliary account or wishing to deposit any foreign currency therein, shall not be required or obliged to disclose the source of funds to be deposited in such account, according to the CBN’s revised foreign exchange manual.

Ineligible sources of deposit into domiciliary account

Proceeds from foreign exchange approvals for visible and invisible trade transactions are not eligible for deposit into a domiciliary account.

Withdrawal

Withdrawals or payment from foreign currency domiciliary accounts shall be done in any of the following ways: Foreign bank notes, mail/telegraphic transfer, and bank draft.

Where a person imports foreign currency in excess of $10,000.00 or its equivalent in other foreign currencies, in cash and deposits the same in the domiciliary account, withdrawal from the account shall be in cash only, the CBN said

Where an account holder converts part of his funds in foreign currency to naira, a sale of foreign currency is deemed to have taken place. Such a transaction shall be at the prevailing interbank rate on the day of the transaction.

Read also: Stabilizing the Naira: A proposed policy to regulate domiciliary accounts in Nigeria (Afonomics) – Part 2

Holders of ordinary/export proceeds domiciliary accounts shall continue to have access to funds in their accounts for eligible transactions with minimum documentation. In other words, the instructions of the account holder shall be sufficient for the own use of the funds in the account irrespective of the payment mode. However, where the funds are to be transferred to third parties, the purpose for the transfer should be provided by the account holder, the CBN FX manual said.