Probing The Legality Of Payment Of Salaries In Foreign Currency In Nigeria: Oduenyi V SMEC International Limited & Anor

By Oluwapelumi Mojolaoluwa Mofoluwawo

The question as to the validity of a contractual agreement to pay employee salaries and entitlements in foreign currency, in Nigeria, was the kernel of the dispute in Chukwuemeka Oduenyi v SMEC International & Anor. In the 2019 decision of the National Industrial Court sitting at Abuja, the court was called upon to interpret S20(5) of the Central Bank of Nigeria Act (CBN Act) in light of the employment fallout between two warring parties. In September 2017, Chukwuemeka Oduenyi, a Nigerian citizen resident in Nairobi, Kenya got a job with SMEC International Limited, an engineering and development company, as Private Sector Business Development Manager, West Africa. He signed a one-year employment contract with them spanning 9th October 2017 – 8th October 2018, and was posted to Abuja, Nigeria. Both parties agreed that his salaries and other entitlements would be paid in United States Dollars (USD). He was to be paid a salary of 6500 USD monthly, an accommodation allowance of 1500 USD monthly, and was to be on probation for 6 months. The contract also stipulated that he may be required to perform his duties in other locations outside Nigeria; and that the terms contained in the employment letter constituted all the terms and conditions of his employment. He accepted the offer, left his family in Kenya, moved to Nigeria to begin work, and rented a 2-bedroom flat at No. 45, Mamman Nasir Street, Asokoro, Abuja on a yearly rent of 19,500 USD. Shortly after that, particularly in November 2017, his employer discovered that the clause in the employment contract to pay him in USD while working in Nigeria was illegal because the legal tender in Nigeria is the Naira and it is an offence for any person to refuse to accept Naira as a means of payment. This position was conveyed to the Chukwuemeka but he complained that his family was in Kenya and he would need foreign exchange for their upkeep. SMEC considered his plight and offered him two different jobs with pay in Naira and Kenyan shillings respectively, that same November. He rejected both offers and insisted on his USD denominated job. As a result, SMEC issued him 1 months’ notice of termination of employment and subsequently fired him in December, 2017 stating an inability to legally pay a Nigerian national/employee in foreign currency as the reason for the termination. Chukwuemeka sued for breach of contract and asked for several reliefs. His main grievance was that the termination was wrongful and that the reason given for it constituted a breach of his contract of employment with SMEC, his employer. SMEC (hereafter referred to as the defendant) on the other hand, contended that their contract of employment stipulated that both parties will be governed by the laws of Nigeria. On this basis, they cited Sections 15, 20[1] and [5] of the Central Bank of Nigeria Act 2007 and argued that since the Claimant’s contract was governed by the laws of Nigeria, payment of the Claimant’s salaries in USD was against the laws of Nigeria. Section 15 of the CBN Act provides that the Naira is the unit currency in Nigeria while Section 20[5] of the Act provides as follows: “A person who refuses to accept the naira as a means of payment is guilty of an offence and liable on conviction to a fine of N50, 000 or 6 months’ imprisonment: Provided that the Bank shall have powers to prescribe the circumstances and conditions under which other currencies may be used as medium of exchange in Nigeria.”

In mirroring the position of the court in this matter, it is necessary to ask a few questions:

Can an employer in Nigeria lawfully pay its employees in currency other than the naira?
Can an employer renege from a contractual agreement because he discovered a legal impediment he did not hitherto avert his mind to?
Did SMEC’s decision to resile from its agreement with its employee because of the legal impediment, constitute a breach of contract?
Did the court enforce an illegality?
Going by their arguments before the court, the agreement between both parties for the payment of salaries in USD had taken effect before the defendant’s sudden discovery and apostolic u-turn. The claimant had received a few month’s salary in USD, he had also received housing allowance in USD. The defendant made an offer to pay in USD which was accepted by the claimant. And parties earnestly began to carry out their parts of the contract. A contract is binding.

The court held inter alia, and rightfully so, that the defendant had put forward no evidence that it initially offered the claimant employment in Naira and he refused. It was only in November 2017, after the agreement had commenced, that the defendant told the Claimant that he can no longer be paid in USD. The Claimant was offered two other jobs in the alternative. The Claimant’s refusal to be paid in Naira arose from the alternative contracts offered to him. His refusal to accept any of the contracts which was payable in Naira might constitute an offence under the CBN Act but his refusal to change the terms of his contract to allow payment of his salaries in Naira did not vitiate the existing contract or constitute a breach of the terms of the contract as to give the defendant cause to terminate the contract. Per Anuwe J., “it is settled in plethora of decisions of the Supreme Court that parties are at liberty to make agreements or enter into contracts to pay in foreign currency. Such agreement is valid and the courts in Nigeria can make awards in the agreed foreign currency. See SALZGITTER STAHL GMBH vs. TUNJI DOSUNMU INDUSTRIES LTD. [2010] 11 NWLR [Pt. 1206] 589; METRONEX NIG. LTD vs. GRILFIN & GEORGE LTD 1991] 1 NWLR [Pt. 169] 651. I have examined the provisions of the CBN Act relied on by the Defendant, but I find that it cannot be a basis for termination of the Claimant’s employment. Its provisions in Section 20[5] did not entitle the Defendant to terminate the Claimant’s employment. The payment of the Claimant’s salaries in USD was agreed by the parties and it formed one of the terms of the contract. The terms of the contract are binding on the parties. See ONYEUKWU vs. FIRST BANK OF NIGERIA PLC (2015) LPELR-24672 CA; EMENIKE LTD vs. OLEKA 2004 LPELR-7358 CA. The Defendant entered into the contract with the Claimant with eyes wide open and with full knowledge of the terms of the contract. Since it was agreed by the parties that the Claimant will be paid his salaries in USD, the Defendant cannot terminate the contract because the Claimant refused to accept any other currency in payment”

Here, the court established two things. One is that the terms of a contract entered into voluntarily are binding and cannot be varied by the court of law. Two is that if such terms are indeed binding, refusal to accept payment in Naira as the CBN Act stipulates may constitute an offence which may be independently prosecuted but, it does not give the defendant leeway to void the contract or escape liability for their responsibility under the contract. Also, the court will always enforce a binding contract. This answers questions 1, 2, 3 posed above.

Going further to establish bad faith on the defendant’s part, the court looked at the alternative contracts it offered to the claimant, one of which had offered to pay him in Kenyan shillings. If the reason given for the termination of the claimant’s employment, by the defendant is anything to go by, offering to pay him in a currency different from the USD but not the Naira is simply, bad faith and an attempt to swindle him. In the words of Anuwe J., “How can it be illegal for the defendant to pay the claimant in USD but legal to pay him in Kenyan shillings?” Clearly, the defendant was merely approbating and reprobating.

What is more, under cross examination, the defendant witness 2 had said that though the claimant was recruited from Kenya and posted to Nigeria, it was the Kenyan office that paid his salary not the Nigerian office. It goes without saying that the CBN Act cannot bind the Kenyan office as to determine what currency salaries were payable in. As such, the reason given for the termination of the claimant’s contract was all the more baseless. The court held that the reason given for the termination of the claimant’s contract constitutes a breach of contract and as such, made the termination wrongful. This answers question 4. No, the court did not enforce an illegality. Rather, in the circumstances of the case, there was in fact no illegality.

A careful interpretation of the provisions of the CBN Act referenced, points at one thing, payment of salaries in foreign currency is very much legal. What is illegal, is refusing payment in local currency. If there is no offer and refusal of the Naira, this section has little bearing on employments and remuneration for work done. And regulations and directives over time, which run contrary to this interpretation have no basis in existing law.

Oluwapelumi Mojolaoluwa Mofoluwawo can be reached at houseoflivingstones@gmail.com