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I am about to digest what I understood about the current FX Transaction limit in Nigeria for me, you and everyone else that is inside or from Nigeria with money in the country or earning money from it.

If you’ve read my earlier post, just 2 days ago (I was still trying to understand the situation at the time), you’d notice that I’ve come a long way getting the head of the thread and finding a solution to the challenge, for my business.

I call all this drama “the FX Challenge”. Please relax and read my head.

The Central Bank of Nigeria (CBN) controls all the inflow and outflow of the Nation’s money; as a regulatory body they’re in charge of almost all the money in the country and are the head of all commercial banks. This includes managing all foreign exchange in the country too.

Although Naira is owned by Nigeria, US Dollar (USD), Pound or Euro, etc are not. Nigeria has to earn them in order to use them. Currently the biggest source of foreign currency in Nigeria is the sales of Crude Oil (Nigeria’s biggest source of income) and a few exports such as Cocoa and Rubber. The country is however majorly an importer and this is where the whole story gets more interesting. Keep reading.

Most of the country’s Businesses are hugely relying on imports, buying goods from China, Germany, United States, Japan etc and doing this with the US Dollar (USD) which is the biggest commercially accepted currency around the world anyway (because at least, it’s stable). 

A company that imports furniture from China will need US Dollar (USD) from their bank to pay the Chinese manufactures. They then sell these goods in Nigeria (in Naira), return back to their bank to change their earned Naira to USD again for more imports. The circle continues, taking the country’s earned USD from Crude Oil and Cocoa straight to China through a leakage we can now agree to call huge importation.

Nigeria imports almost every kind of junk from overseas. I once read that businesses in Nigeria import silly things as Toothpick, Slippers, Butter etc from around the world. These are few of the things Nigerians can easily manufacture to fill the needs and save the economy.

It’s not just the importers that take Nigeria’s hard earned Dollars out, but so do the rich men who go for vacations, take their kids along and carry their Naira debit cards to spend their locally earned Naira in UK, Dubai, etc and then the CBN has to remit the countries they visit and in exchange take away Naira from these people’s account locally (usually done by the banks and switching companies).

The bottom line is, we spend most of the US Dollars CBN has and demand more everyday people travel abroad and businesses choose to import everything (instead of export something).

The CBN is becoming short of US Dollars now, because Crude Oil has lost almost 50% of its selling price within a few years and we have only few other ways for the country to earn the US Dollar it needs for its foreign exchange (FX).

Few months back, the CBN could not fund the commercial banks with Dollars (because it has very little of it) and thus the banks had to limit most account’s daily dollar spending to $300 per day and in some banks as low as $100 per day with a cap of $1000 or $3000 per month.

That didn’t stop the demand, because people wanted the US Dollars more to fill their lifestyle and business needs. In fact, it awakened more hoarders of the Dollar and the company is ruined!

Now the CBN is running out of USD that they might not be able to cover the demand soon. They’re deciding to stop all Debit Cards from spending money outside the country (any currency, except Naira) and all other Foreign Exchange (FX) transactions including online shopping (in USD).

This is a revolution and in my honest opinion it will wake up many Entrepreneurs like me and possibly you from their slumber. We will now have to think of exporting, so we can earn the US Dollars we need. 

Even though I am hopeful that CBN will recover soon, by supporting diversification of exports to other tangible sources of income for the nation, we needed this call of duty years ago.

Nigeria is a rich country, rich in resources; 170 Million brains, 356k square miles of land, loads of livestock animals etc. 

We can fall back to exporting what we have, earn the US Dollars we need for the lifestyle we want to live and business we want to do outside the country. 

This will regain the value of the Nigerian Naira in the world economy. Foreign countries in need of our products will demand Naira or bring US Dollars to us and our economy will reshape itself again.

I hope this little pieces helps someone understand the situation and also put someone towards thinking of local production and export. Let me know where I misstepped the fact about this situation, I personally code-named it “The FX Challenge!”

PSS: You can comment below and I was inspired to write this by a staff of GigaLayer, Joshua after explaining all of this to him. ;)