Banks automatically create domiciliary accounts for Naira4Dollar recipients

Commercial banks in Nigeria are automatically opening domiciliary bank accounts for Beneficiaries of diaspora remittances in Nigeria under the CBN’s Naira4Dollar scheme, Nairametrics authoritatively confirms.

The central bank introduced the scheme earlier in the month, offering N5 for every dollar remitted through any commercial bank or its partner receiving banks in Nigeria. The scheme took effect on Monday, March 8, 2021, and will end on Saturday, May 8, 2021.

According to the CBN, the scheme is “an effort to sustain the encouraging increase in inflows of diaspora remittances into the country”, a major source of forex liquidity for the apex bank.

The scheme is aimed at improving Nigeria’s remittance inflows which Nairametrics currently estimates to be about $1.1 billion citing CBN data as its source.

READ: CBN “Naira 4 Dollar Scheme” Explained

How it works

As part of our Financial advocacy initiative, Nairametrics Research conducted an investigation to determine the efficacy of the scheme and to find out whether commercial banks were complying with CBN’s directive to banks to pay beneficiaries in dollars and an extra N5 per dollar remitted.

Here are our findings;

• We got someone to transfer $100 to a beneficiary in Nigeria.
• The beneficiary provided their local naira bank account nos.
• The transferor who resides abroad then transferred the $100 to the beneficiary’s account in Nigeria using WorldRemit.
• WorldRemit sends an email and text notification to the beneficiary confirming that an inflow has been deposited in the account.
• The beneficiary went to the bank to claim the inflow. Upon discussing with the bank official, they are told that they received the $100 in a domiciliary account.
• The account owner then asks how an account was opened without their knowledge. The bank official responds that the account is automatically created upon receipt of foreign remittance.
• We then asked if the account is a suspense account or if that is transactional, the bank official responds that it is transactional, however, to a cumulative inflow of $2,000.
• Once the inflow is higher than this amount, the beneficiary is expected to fulfill KYC requirements to continue operating the account.
• The inflow can also be seen in the bank’s mobile banking application balances. The amount received is withdrawn easily and then you can go to the streets to sell at the prevailing black market rate.
• The N5 per dollar was also credited to the beneficiary bank account.

READ: Naira4dollar scheme “is not comprehensive enough” to fix remittance shortages – ABCON Chief

What this means

This new initiative suggests the CBN has temporarily opened up the ease of account opening for domiciliary accounts as this promo is meant to last for three months.

• Commercial banks do not need the permission of the recipients to open a domiciliary account, a huge departure from the CBN’s strict policy documentation requirement for opening domiciliary accounts.
• However, we observed that the email communication from WorldRemit includes a comment on account opening under the BIC/SWIFT as follows “consentNGUSDAccountCreation”.
• Apart from dependents expecting money from loved ones abroad, Small Business owners operating in Nigeria can now receive funds from clients without the need to provide a domiciliary account nos in the first instance.
• All they need to do is provide their naira bank account number and then their bank automatically opens a domiciliary account number once a remittance inflow is received.
• If this initiative is sustained, it could create a massive platform for the retail market to receive or earn a significant amount of forex abroad without the need to own a PayPal account or any other competing account.

READ: Diaspora remittances are down 61% YoY highlighting need for CBN’s Naira4Dollar promo

But…

While Nairametrics Research also suggests the inflows can be withdrawn at source, it could also open up beneficiaries to tax authorities who also monitor bank account inflows.

• The Federal and State Inland Revenues also have access to bank accounts and can track inflows which they often use as a basis for their “best of judgment” tax demand notices.
• This development may also be viewed by critics as the CBN effectively dollarizing the economy through the proliferation of domiciliary account openings.

It is also perceived by critics as confirmation that the CBN is allowing Nigerians to withdraw and sell dollars via the black market.