How Do I Get Paid (Methods of Payment)
Methods of payment include either confirmed irrevocable letters of credit, bills for collection, open account or any other internationally accepted mode of payment. Whatever the mode adopted, the proceeds must be repatriated within 90 days from the date of shipment of the consignment. U.S. exporters are advised to ship goods only on sighting confirmed and irrevocable letters of credit. The preferred method of quoting is "CIF."
U.S. firms also are advised that fraudulent business practices involving bogus financial documents through non-existent banks are common. Independent verification of the legitimacy of transactions is recommended. U.S firms should also consult with their bankers for document verification. It is necessary to confirm the validity of any Nigerian bank with the U.S. Commercial Service office in Nigeria.
How Does the Banking System Operate
The Nigerian banking system consists of twenty four commercial banks, over 800 micro-finance banks, five discount houses, and three development banks. The Central Bank of Nigeria (CBN) regulates and supervises the activities of these institutions. The CBN is primarily responsible for formulating policies and monitoring the banking system to ensure that operators comply with monetary, credit, and foreign exchange guidelines. Nigerian commercial banks perform three major functions: accepting deposits, granting loans and operating payment and settlement mechanisms.
Consistent with the objectives of enhancing efficiency in the foreign exchange (FOREX) market through market-based determination of the Naira exchange rate, the Central Bank in July 2002, adopted the Dutch Auction System (DAS) to replace the Inter-bank Foreign Exchange (IFEM). However on February 20, 2006, it further liberalized the market by introducing the Wholesale Dutch Auction System (WDAS), in which it sells currencies to commercial banks and oil-producing companies only. These in turn serve individual users. However, late 2008, the CBN suspended the WDAS and introduced the Retail Dutch Auction System (RDAS) to check frivolous demand for foreign exchange which gives room for speculation.
In addition to the commercial banks dealing in foreign exchange, there are Bureaux de Change (BDC) from where foreign currencies in notes can be traded. The rate at which currencies are traded at the BDCs is slightly higher than what obtains at the official market. However, the currencies required are made available expeditiously and conveniently. The BDCs were recently given approval to sell Travellers’ Cheques; the modalities are being worked out.
To encourage investment in Nigeria, the GON has removed all barriers to repatriation of capital, profit and dividend. Repatriation of proceeds from disposal of assets is allowed. Overall, U.S. companies are encouraged to consult their Nigerian bankers for advice with respect to foreign exchange dealings.
U.S. Banks and Local Correspondent Banks
Citibank is the only U.S. bank that has presence in Nigeria. However, United Bank of Africa (UBA), a local commercial bank and Standard Chartered Bank both operate branches in the United States. Most Nigerian banks have correspondent relationships with U.S. banks.
1, Idowu Taylor Street
Victoria Island, Lagos
P.O. Box 6391, Lagos
Tel: (234-1) 262-2000-9; 262-2024-32
Fax: (234-1) 261-8916
U.S. Affiliate: Citibank
United Bank for Africa
UBA HOUSE 57 Marina, Lagos
Nigeria P.O. Box 2406, Lagos Tel: (2341)2644651-700 Telex: Nos. 28493, 28496, 28489 and 28490
E-mail : email@example.com
U.S. Affiliate: UBA, New York
Standard Chartered Bank
142 Ahmadu Bello Way
Victoria Island, Lagos
Local funding can be obtained through any Nigerian bank. To a limited extent, insurance companies, building and property development companies, pension fund companies and other institutional investors can also provide financing.
With the return of democracy to Nigeria, a number of U.S. government agencies are now willing to provide financing for feasibility studies (TDA – Trade and Development Agency); financing for importing American products and services (EXIM BANK – Export-Import Bank); and investment funding (OPIC – Overseas Private Investment Corporation). The African Development Bank (AfDB) also grants export stimulation loans to finance certain operations of exporting companies. The AfDB channels these loans through the CBN to the Nigerian Export-Import Bank (NEXIM), Bank of Industry (BOI), and licensed export financing banks.