The national currency of a country is the country's legal tender, which is used as a medium of exchange, store of value, and unit of account. The performance of these functions is to the exclusion of other currencies within the country's territorial boundaries. Nigeria, as a foreign State by virtue of the preamble to the Constitution of the Federal Republic of Nigeria 1999 (as amended) and chapter 2 of the constitution, has the right to choose its own currency. This power has, in turn, been vested in the Central Bank of Nigeria, the country's apex bank. Thus, the business of currency and coinage resides solely with the central bank, and it is expressed clearly in Sections 17 and 18 of the Central Bank of Nigeria Act 2007 (CBN Act), which provides that the bank shall have the sole right of issuing currency notes and coins throughout Nigeria and the bank shall also arrange for the printing of these currency notes and minting of the coins.
The Naira remains the sole legal tender in the country by the provisions of Section 20(1) of the CBN Act 2007, which states in clear terms that the currency notes issued by the Central Bank of Nigeria shall be legal tender at their face value for the payment of any amount. This provision implies that any individual or corporate entity transacting in Nigeria shall be subject to using the Naira currency as the sole means of payment of any amount. The CBN Act (the act) not only made provisions for the using Naira as a legal tender in the country but also went further to criminalize the refusal of the currency. Section 20 (5) provides that any person who refuses Naira as a means of payment is guilty of an offence under the law. These two provisions presuppose that any transactions in currencies other than the Naira anywhere in Nigeria contravenes the law and is an illegal practice. The Federal High Court also buttressed these provisions in the case of RB Properties Limited v. Guaranty Trust Bank PLC1, reiterating that the CBN Act renders any non-naira transaction or agreement entered into by any person or corporate entity in Nigeria illegal.
However, despite the provisions already implemented, the American dollar is increasingly becoming the alternative to Nigeria's currency, leading to an unofficial dollarisation of the country's economy. The dollar has been positioned to play an overwhelming role as a medium of exchange, store of wealth and unit of account, which are the functions ordinarily reserved for the domestic currency, the Naira. Individuals and institutions have resorted to valuing domestic transactions and purchasing of goods and services in dollars, creating an overwhelming demand for the currency due to its unregulated usage. The volatility of the Naira to U.S dollar exchange rate has also encouraged reliance on dollars as the veritable store of value especially in recent times. Little wonder that property values, rental fees, school fees, hotel rates, and even sales of goods, amongst others, are priced and paid for in dollars. The C.B.N in a bid to curb this emerging economic menace had initially released a circular criminalizing the dollarisation of the Nigerian economy in 20152, condemning currency substitution and dollarisation of the Nigerian economy and warning the general public against the illegal pricing and denominating the cost of any product or service whether visible or invisible in a foreign currency other than the naira. The C.B.N. also advised commercial banks against collecting foreign currencies for payment for domestic transactions or using their customers' domiciliary accounts for making payments for transactions originating and consummated in Nigeria. In the same vein, the CBN in its Circular Ref: FMD/DIR.CIR/GEN/08007 "Establishment of the Investors & Exporters FX Window" on 21st April 2017 created a special window for investors, exporters and end users to improve liquidity in the foreign exchange market and ensure timely settlement of eligible transactions, which many have tagged as a welcome development. Although the foreign exchange market in Nigeria continually faces a short supply of foreign exchange to meet the rising demand, the gap between the exchange rates in various markets keeps expanding at an alarming rate.
CONCLUSION
Various law scholars have argued that the seculars released by the Central Bank of Nigeria prohibiting the pricing and denomination of goods and services in dollars is erroneous in that the fact that the naira is the legal tender of the country does not amount to the exclusion of the voluntary adoption of other media of exchange between consenting parties. Thus, parties can agree to enter into a contract and denominate the consideration in dollars or other foreign currency. It is, however, opined that going by the provisions of the C.B.N. Act and the various circulars released by the apex bank, the extant position of the law about the use of foreign currency in payment of goods and services is as captured in those circular pending when it is stated otherwise.
It is also pertinent to note that this article is incomplete on the subject matter. Parties should endeavour to engage the services of a legal professional to appreciate the peculiarity of their case.
Footnotes
1. FHC/L/CS/374/2016
2. CBN Circular BSD/DIR/GEN/LAB/08/013, 17 April 2015, "Currency Substitution and Dollarisation of the Nigerian Economy".
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