Wikipedia defines Foreign Currency Account (FCA) as “a transactional Account denominated in a currency other than the home currency and can be maintained by a bank in the home country (onshore) or a bank in another country (offshore)”.
A foreign currency account or domiciliary account refers to an array of accounts denominated in foreign currency other that the currency of the home country where the bank operates. In the case of Nigerian such accounts includes Dollar Account(USD), Pound Sterling Account (GBP), Japanese Yen (JPY) and all other account that are not Naira denominated.
Here are 5 reasons why you need a Foreign Currency Account (Domiciliary Account).
1.Store of value
One most important reasons why Nigerians maintain domiciliary accounts is to be able to edge against the depreciating Naira. The value of Foreign currencies especially Dollars has doubled in the last 3 years, thus making whoever must have stored his money in USD 3 times richer that people that has maintained their money in Naira.
2.Payment of foreign services and professional bodies
One of the options available for local customers to make payment for foreign services such as mortgage, health bills and foreign professional membership is to maintain and fund their domiciliary account. It is from the account they can make direct transfers to the account of the foreign service providers and pay for professional membership. This helps to aid customer to business relationship and avoids long procession procedures that may be associated with sourcing for forex from CBN through form A processing .
3.Payment of Foreign business partners.
As an alternative from sourcing forex from CBN to pay for imported good and services, some businesses maintains and fund their domiciliary account to be able to make such payment directly from their accounts. There are however regulatory limits to the frequencies and the amount that can be transferred to business partners abroad if the funds in the domiciliary account is linked to cash lodgment instead of foreign inflows.
4.Receipt of Foreign inflows
As an alternative to allowing your bank to change your foreign currency inflow to Naira and credit your Naira account with the value. You can Maintain a Foreign Currency Account and ask your Foreign business partner to transfer the money directly to your domiciliary account from where you can withdraw the much you need and sell to a Bureau de change operator at a rate probably higher that the bank rate.
5.Investment in mutual funds
A few of Nigerian banks allow their customers to invest in mutual funds denominated in foreign currency, especially USD. Maintenance of a domiciliary account from where the investable funds is drawn is a prerequisite to being part of the mutual investment.
Read also: Why you need to open account for your kids
