Customers rush as banks buy dollars online at rates better than black market

Bank customers went into a frenzy on Tuesday after learning some banks had set up platforms to allow depositors electronically convert their dollars to naira above black-market rates without having to withdraw cash.

At least two banks are confirmed to have begun the online conversion by Tuesday, and at least one bought the dollar at N770.5, more than what street traders offered, according to multiple customers.

For years, holders of dollars and other foreign currencies in Nigeria preferred to chase higher exchange rates at the black market as Nigeria faced chronic shortage of foreign currencies.

Earlier this month, the Central Bank of Nigeria removed controls on the naira, allowing it to trade freely against other currencies, a move that resulted in the biggest slump in the value of currency.

The government says it hopes to attract foreign investors who left due to difficulties in repatriating their money. But the policy is expected to stoke inflation as imports become more expensive and consumer goods cost more.

– Banks beat the black market

The reform has unsettled the forex black market as street traders now compete daily with banks to attract customers.

On Tuesday, the naira closed at the official Investors and Exporters window at N763 to the dollar, an improvement over the previous day’s N768.17. The black market exchanged within the same range.

Before the reforms, the official rate hovered around N460 while the black market was far higher at about N750.

Guaranty Trust Bank announced on Monday that its customers can now change dollars in their domiciliary accounts to naira using its online banking tool.

“You can convert US Dollars in your GTBank Domiciliary Account to Naira directly on our platform. It’s as instant as a regular transfer between accounts,” the bank said in email message to customers.

Depositors can convert up to $50,000 daily and transactions run between 9am and 4pm daily, as directed by the CBN.

The bank did not disclose the rate it applies but multiple customers said they successfully exchanged on Tuesday at between N770 and N771.5.

“I tried this and it worked! Exchange rate was US$/₦771.5. We have been living in bondage since,” Wilson Erumebor, an economist at Nigerian Economic Summit Group, wrote on Twitter. “We simply incentivised inflow into the parallel market and created that wide gap for no good reason.”

As the bank offered that amount, black-market buyers in Abuja told Pluboard they could only buy between N760 and N766, rates that put them at disadvantage.

Customers said Standard Chartered Bank and a few other banks also set up similar tools. It is not clear how the banks arrive at their rates.

In an earlier guideline, the central bank said for the authorised market the spread between buy and sell rates is expected to be N1.