Cbn clarifies position on operation of domiciliary accounts

Here is a summary of the Central Bank of Nigeria's (CBN) clarification on the operation of domiciliary accounts:

Background

The CBN had earlier issued a circular in 2020 restricting the operation of domiciliary accounts in Nigeria. The circular stated that individuals and corporate organizations could only maintain a maximum of $5,000 in their domiciliary accounts, and any excess amount above this threshold would be converted to naira.

Clarification

Recently, the CBN clarified its position on the operation of domiciliary accounts in a circular dated March 25, 2022. The clarification is as follows:

  1. Eligibility: Domiciliary accounts are only available to individuals and corporate organizations that have a valid foreign currency income or have a legitimate reason for holding foreign currency.
  2. Maximum Balance: The maximum balance that can be maintained in a domiciliary account is $5,000 (or its equivalent in other foreign currencies). Any excess amount above this threshold will be converted to naira.
  3. Conversion: The CBN will convert excess foreign currency balances above the maximum threshold to naira at the prevailing interbank exchange rate.
  4. Withdrawal: Withdrawals from domiciliary accounts are allowed, but only up to the maximum balance of $5,000. Any excess amount above this threshold will not be available for withdrawal.
  5. Maintenance: Domiciliary accounts must be maintained with a minimum balance of $100 (or its equivalent in other foreign currencies) to avoid dormancy fees.
  6. Conversion to Naira: The CBN will convert foreign currency balances in domiciliary accounts to naira at the prevailing interbank exchange rate when the account is closed or when the account holder requests conversion.
  7. Reporting: Banks are required to report all transactions on domiciliary accounts to the CBN, including conversions, withdrawals, and deposits.

Conclusion

The CBN's clarification on the operation of domiciliary accounts aims to ensure that foreign currency transactions in Nigeria are transparent, legitimate, and in line with the country's foreign exchange regulations. The clarification provides guidance on the maximum balance that can be maintained in a domiciliary account, conversion procedures, and reporting requirements.