- CBN has granted IMTOs access to settle diaspora remittances in Naira
- The announcement comes five months after the CBN had asked banks and IMTOs to pay inbound transfers to customers in Nigeria in Naira
- The measure aims to improve foreign exchange liquidity and increase remittances through formal channels
The Central Bank of Nigeria has granted access to International Money Transfer Operators (IMTOs) to access naira directly from the CBN window or through Authorised Dealer Banks (ADBs) to settle transactions for the sale of foreign exchange (FX) in the market.
IMTOs are companies approved by the CBN to facilitate the transfer of funds from individuals or entities in the diaspora to recipients in Nigeria and the payment of the equivalent amount to a beneficiary through a clearing network to which the IMTO belongs.
The apex bank said the measure is part of its commitment to enhancing local currency liquidity, ensuring the smooth functioning of the FX markets and improving formal remittance channels.
In a circular released on Monday, June 24, to this effect and signed by CBN’s acting Director, Trade and Exchange Department, Dr W. J. Kanya, the CBN said, “The bank has implemented measures that will enable eligible International Money Transfer Operators (IMTOs) to access NGN liquidity at the CBN window.
“These measures are aimed at widening access to local currency liquidity for the settlement of diaspora remittances.”
The bank also set rules to guide the process, which includes same-day settlement for transactions executed before 12 noon on a trading date; the pricing on the CBN portal will be reflective of NAFEX (Nigeria’s Autonomous Foreign Exchange Market)traded rates observable on an acceptable market benchmark.
The guideline also stipulates that the operation of this market segment must follow the existing arrangement for authorised dealers with Foreign Portfolio Investments participating in the primary market securities auctions.
It also mandates that all participants submit regulatory returns to the CBN on a daily basis. These returns are expected to contain all the relevant information on the sources of funds, and participants in this segment are the IMTOs, ADBs, and the CBN.
CBN stopped banks, IMTOs from inbound transfer payments in dollars
The CBN had previously told banks and IMTOs to halt dollar payments of inbound transfers to customers in Nigeria.
In a revised guideline to IMTOs and banks on January 31, 2024, the CBN said all inbound money transfers to Nigeria will be paid only in Naira through a bank account or in cash at the prevailing rate in the Nigerian FX market.
It added that transfers above the Naira equivalent of $200 must be accredited to the recipient’s account number while Naira cash payment equivalent for amounts below $200 will require an acceptable means of identification such as an international passport, driver’s licence, national identity card and INEC Permanent Voters Card.
The guideline also prohibited banks and fintechs from operating IMTO services but could act as agents. It said, “All banks are prohibited from operating International Money Transfer Services but can act as agents. Also, financial technology companies are not allowed to obtain approval for IMTO.”
New measure part of CBN’s effort to increase diaspora remittances inflow
Before the latest update, the CBN had in May 2024, granted an approval-in-principle (AIP) to 14 IMTOs to improve foreign currency remittance through formal channels, a target the CBN governor, Olayemi Cardoso, recently said is achievable within a year.
Cardoso had said, “We have had very productive discussions with leading IMTOs where we collectively committed to doubling remittance flows through formal channels into Nigeria in the immediate short to medium term.
“We are wasting no time driving progress to remove any bottlenecks hindering flows through formal channels permanently. We have a determined pathway and a sequenced approach to tackling all challenges ahead, working hand in hand with key stakeholders in the remittance industry.”
In a statement announcing the AIP, CBN’s acting Director of Corporate Communications, Hakama Sidi Ali, said, “This will spur liquidity in Nigeria’s Autonomous Foreign Exchange Market (NAFEX), augmenting price discovery to enable a market-driven fair value for the Naira.”
The apex bank noted that the AIP initiatives among others will promote competition and innovation among IMTOs, reduce the cost of remittance transactions, boost financial inclusion and help increase and sustain the supply of foreign exchange in the official market.
It believes that increased remittance inflows will reduce FX volatility, caused by such factors as fluctuations in foreign investment and export proceeds.
CBN recapitalisation policy has got banks running helter-skelter for funds
Meanwhile, TheRadar had reported that Deposit Money Banks (DMBs) in Nigeria have been on their toes making efforts towards meeting the new recapitalisation policy of the Central Bank of Nigeria (CBN).
The new recapitalisation programme comes 20 years after the last exercise in 2004.
