High exchange rate on Paypal Nigeria payments

Posted by Felix Okoli on Friday December 12, 2014 at 8:29:22:

This is not the first time I'm experiencing this issue but this is probably the first time I'm complaining about it. I'm happy that Nigerian banks now work with Paypal and allow people to make payment on the platform as long as they've linked their Mastercard or Visa to Paypal even if it's a Naira account. What I'm really having a problem with is on the issue of the exchange rate used when making payments.

I recently renewed my subscription for an online service provided by a US based company and in the past, my default means of making payment was with a USD Visa card which I funded with US dollars I got from the black market. I preferred using the USD card for making payment since it allowed me to have better control of how much I was willing to pay per Dollar. Recently, I decided to simply try and make payment for the service using my Verified Paypal Nigeria account and was a bit alarmed by what I saw - I was charged about N4733 for a $25 payment! That means I paid N189 for every US dollar I got from my bank.

I know that the price of the Nigerian Naira has considerably fallen in favour of the US dollar as result of a recent CBN action to devalue our currency but I didn't know that the bank was going to charge me as much as N189 to N1. Why don't Nigerian banks use the official CBN rate for customers? Why must they use any rate that just gives them the most profit? This is one of the reasons why I don't really like making payments with a Naira card or Paypal Nigeria account when the merchant's currency is in US dollars.

When a bank customer initiates to make a payment for a transaction in foreign currency using his bank's provided service, the bank will sell the currency to them at their own rate which is about the same price as the black market price at that time. The exchange rate used for making foreign payments with a Naira account is normally not under the control of the bank customer but of the bank.

Nigerian banks are not making foreign currency payments attractive to their customers as they charge any rate they want making them about the same with black market operators if not higher. I would have preferred that they at least give their own customers a little above the official rate they get from the CBN rather than charging us extremely higher.

Exchange rate used by banks only encourage people to try and negotiate for foreign currency on their own by patronizing black market currency dealers and that would at least allow them get it at a price within their control. Exchange rate used by Nigerian banks tend to vary from time to time and depends on the forces of demand and supply.

At this rate, it won't be a surprise if they start charging us up to N200 for one single US dollar payment.

I'm not encouraged to keep using Paypal Nigeria or my Naira card for making foreign currency payments. I might just go back to using my US dollar card since I would always be able to fund that with US dollars purchased at the black market at a more favourable rate within my control.