Naira devaluation fuelling real estate business transaction in foreign currency

Once again, the real estate market in Nigeria is in for what close industry watchers have described as ‘crisis of currency’ as some sellers and landlords, mostly at the upper end market, have chosen to transact their business in foreign currency rather than the Naira.

The first time this crisis came up was during the boom days of the market when it was strictly the seller’s market  such that he could give his product any price tag and also freely decided what currency denomination he wanted to sell the product for.

The global financial meltdown of between 2008 and 2010, which closed the chapter on market boom, ended all these preference and ‘arrogance’ of the sellers and landlords, forcing them not only to accept local currencies, but also to dance as buyers and tenants called the tunes.

Now, following the devaluation of the Naira officially by 13 percent and unofficially by over 50 percent, property sellers are at it again, demanding foreign currencies, especially the dollar, in their real estate business transactions which, expectedly, has led to slow transaction and low product uptake.

Many stakeholders, particularly property vendors, see this as an unhealthy development for a market that is still largely evolving, advising that sellers and buyers must find a meeting point or a way out in order to keep the marketing going.

Though he believes that a developer or landlord has absolute right to decide what to do with his property or how he wants to sell or rent it out, Meckson Innocent Okoro, the Principal Partner of M.I.Okoro & Associates ( Corporate Estate Agents), says it is unpatriotic for a house owner to insist on foreign currency for selling or renting a house to a prospective buyer or tenant.

From a diplomatic and legal perspective, Maryanne Udo-Okonjo  notes that  Naira is the legal tender in Nigeria for payment for goods and services, adding however, that Nigerian entities or individuals can price their goods or services in foreign currency but should be willing to accept the Naira equivalent of the said foreign currency.

Udo-Okonjo, who is the Chairman/CEO of Fine and Country International (W/A), reasons that even though refusal to accept Naira as a means of payment constitutes an offence, a vendor or a service provider may state his preference to be paid in a particular foreign currency but the discretion of paying in that particular foreign currency rests on the payer.

As an international real estate network reputed locally and worldwide for its unique blend of intelligent and creative marketing and branding services, Fine and Country provides solid market research and property investment advisory service coupled with a professional approach to corporate sales and leasing of premium commercial and luxury residential properties.  The company has operations spanning over 300 offices worldwide in the UAE, South Africa, Mauritius, with its head office located on Park Lane, Mayfair in the United Kingdom.

The Chairman/CEO, ostensibly on account of their multiple currency transactions, advises that “if the payer decides to pay in Naira, he is bound to pay the Naira equivalent of the foreign currency as at the time of making the said payment”.

Continuing, she says, “if the payer decides to pay in foreign currency, the payment should be from his ordinary domiciliary account or from his offshore sources; all payments for purchase or acquisition of landed properties in Nigeria should only be made by means of bank transfers or cheques drawn on banks in Nigeria”.

It should be recalled that the Central Bank of Nigeria (CBN), in a statement signed by its Director of Corporate Communications recently,  noted with dismay the increasing use of foreign currencies in  domestic economy as a medium of payment for goods and services by individuals and institutions.

The statement alluded to the  CBN Act which says  Naira shall be legal tender in Nigeria at their face value for the payment of any amount, adding that any person who refuses to accept Naira as a means of payment is guilty of an offence and liable, on conviction, to a fine of N50,000 or six months imprisonment.

Legal pundits are however, quick to point out that Nigerian law does not prohibit the use of foreign currency in local transactions, pointing out that  goods or services in the country  may be priced in foreign currency but the vendor or service provider is bound to accept Naira equivalent of same if the payer chooses to pay in Naira.

CHUKA UROKO