Payments to Nigeria: problems and solutions
In this article we invite you to have a look together on a problem of money transfers to Nigeria on a global scale, to have a closer look on all the options and choose what works the best for you, using our tips. Tempo can always become your solution, keep reading to find out how!
As a business owner expanding internationally and starting business with Nigerian suppliers you’ll face many challenges, including law, tax regulations, shipping logistics – but also payments. No one wants to send hundreds or thousands of euros abroad and worry that they will not arrive in time – or won’t reach the recipient at all. When it comes to money transfers, we must be 100% sure, don’t you agree?
Nigeria is home to a large economy and it’s Africa’s biggest oil producer, with a population of over 180 million. Nigeria’s economic potential is considerable –as the entire population speaks English, doing business with Nigeria is practical.
Sounds complicated? Let us prove to you that it seems like it only in the beginning. Applying the right tactic this type of cross-border transaction will become easy for you, since in the end it’s all about choosing the right payment tool.
This is our series of tips on how to find the best way to pay your suppliers in Nigeria.
The desired payment currency
When paying a foreign supplier or freelancer in Nigeria, you must agree on the currency before setting up the invoice. In some cases, international suppliers or vendors prefer to be paid in their home currency, hence, in the Naira. Furthermore, you may want to pay in your home currency or another currency, or the vendor may prefer to be paid in USD (and have a foreign account that can receive USD seamlessly).
In result, this decision will influence how much you pay a business partner. Will this person receive an equivalent amount of the official currency rate? Then you will have to pay the entire markup fee posed by your banking providers. If so, it’s best to compare currency exchange rates before deciding on the institution you use for making the transaction.
Now that you know the details of your payment currency, let’s dig into the different payment types.
Different payment types
When buying your products or services internationally, you and your customers seek the safest, fastest, and most cost-effective payment method – and you want to reduce any complication. For making a transaction between your country and Nigeria, these are the most common options:
- Bank transfer
- Cash collections
- Electronic money transfers
- TEMPO Money Transfer
No matter which payment method you choose, each has its pros and cons. Simply said, if you choose to make transactions from your home bank to a Nigerian bank, you should be aware of several days of delay. Electronic money transfers are reliable and fast, but markup rates can climb high. If you are more upfront and want to try out what new technologies can reveal, blockchain could be a welcome alternative to slow expensive payment methods.
A good sign for international payments is that digital payments in Nigeria have hit 105 trillion Naira ($256 billion) in 2019. This rise was partially fueled by fintech companies like Flutterwave and Paystack, which developed electronic payment solutions for individuals and businesses. It was also fueled by a rising trend in mobile adoption – people are getting used to using e-wallets for transactions.
Let’s learn how each of these options works in real life.
1. International Bank Transfers
The most common method used to date is bank transfer, so transferring your money from your bank account to a recipient’s account in Nigeria.
· High security
· Cost: International wire transfer cost is between $11 and $30 + 1% to 3% surcharge to the exchange rate.
· Additional fee: the foreigner bank of your recipient may charge additional fees for the incoming transfer, which can cause inconveniences and complications for your customer/partner
· Time: such bank transfers won’t be instant, it will take within 2-5 business days
· Relevancy: 49% of Nigeria’s population is unbanked, so a bank transfer is not always the best method to pay individuals in Nigeria, meanwhile business partners are more likely to have a bank account but you risk to confront delays and friction from local bank’s side.
· Cash pick up: Western Union has 5,000 locations across Nigeria offering the option of cash pick up. We should keep in mind, that for some cultures cash remains the most common payment method.
· Unpractical: cash transfers oblige the recipient to pick up the money in person after providing the requested documents (usually transaction number and a valid ID).
3.Payment service providers
· Easy to use
· High speed of transfers
· Cheaper than banks
· Additional fees: transaction fee calculated on a percentage basis, depending on the amount of transfer.
· Delays: If a mistake happens during this transaction, it can often take from days to weeks to get the money back. Therefore, you should always pay attention to all details and triple-check every transaction.
4.TEMPO Money Transfer
Evolving technologies like blockchain allow faster and more secure transactions to Nigeria than many competing payment technologies. The goal of blockchain is to use a digital currency to replace the exchange of actual fiat money – making its transaction seamless across international borders.
One example provider is TEMPO, a cross-border payment solution that offers instant, real-time payment processing. By utilizing blockchain, TEMPO can provide immediate (1 hour) and less expensive transactions than the competition.
Businesses will only have to register online with the providing payments gateway, and TEMPO will transfer the agreed-upon amount of money directly to their payments partner in Nigeria. The charges recipients will receive the dedicated amount within a few hours, and both business parties can fulfill their service agreement.
Want to know more? Watch this video for a complete case study of transferring money between France and Nigeria.
Details you need to transfer money to Nigeria
Lastly, if you want to transfer money to Nigeria, you need to have a few details at hand.
● Your government-issued identification document (ID)/ International Passport
● The name of the beneficiary precisely as it appears on his ID card/Passport
● It’s recommended to have the address of the recipient
● The recipient’s cell phone number to send notifications upon money arrival
● The recipient’s account number and bank number/name
The information required may vary depending on the provider and the transfer method. Sometimes, the recipient’s home address is not necessary. Other times, you need to verify your own identity before sending money. Either way, always make sure to do your research to ensure your payment goes through smoothly.
With this knowledge at hand, sending money to someone in Nigeria is no longer rocket science. Are you looking for a fast, easy, and secure payment provider for your global business partners? Check out TEMPO – payments is what we do best.