The Central Bank of Nigeria (CBN) has issued a directive allowing eligible International Money Transfer Operators (IMTOs) to sell foreign exchange (Forex) on Nigeria’s official window with immediate effect.
The CBN circular, signed by Dr. W. J. Kanya, Acting Director of Trade & Exchange Department, outlined several guidelines for compliance by IMTOs and Authorized Dealer Banks (ADBs). One key point is the option for same-day settlement for transactions executed and confirmed before noon on a trading date, which is expected to expedite the process and ensure quicker liquidity for remittance beneficiaries.
The circular states: “As part of CBN’s commitment to the smooth functioning of the foreign exchange markets and enabling greater remittance flows through formal channels, the Bank has implemented measures that will enable eligible International Money Transfer Operators (IMTOs) to access Naira (NGN) liquidity through the CBN. These measures are aimed at widening access to local currency liquidity for the timely settlement of diaspora remittances.”
Eligible IMTO operators can now access the CBN window directly or through their Authorized Dealer Banks to execute transactions for the sale of foreign exchange in the market. Pricing for the transactions will be determined based on prevailing Nigerian Autonomous Foreign Exchange (NAFEM) rates, ensuring transparency and adherence to a market benchmark.
The move comes as the official market struggles with FX liquidity. For about a month, the value of FX turnover on the NAFEM window has ranged between $83 million and $390 million. The new directive is expected to enhance the supply of foreign exchange in the official market, reduce pressure on the parallel market, and help stabilise exchange rates.
The circular emphasised that this market segment will follow the existing arrangement for authorized dealers with Foreign Portfolio Investment, aligning it with the primary market securities auctions. Additionally, all participants are required to submit regulatory returns to the CBN daily, containing comprehensive information on the sources of funds.
IMTOs are also instructed to confirm their partner banks and advise standard settlement instructions to ensure the smooth implementation of these measures.
LEADERSHIP recalls that in January 2024, the CBN removed the previous cap on exchange rates quoted by IMTOs, allowing for greater flexibility in remittance transactions. Furthermore, the CBN revised guidelines for the operations of IMTOs, significantly increasing the application fee for an IMTO license from N500,000 in 2014 to N10 million. The apex bank also established a minimum operating capital requirement of $1 million for both foreign and local IMTOs.
Previously, IMTOs were barred from purchasing foreign exchange from the domestic market to fulfill their obligations. However, this new circular appears to lift that ban, allowing IMTOs to trade on the official market.
The CBN has also formed a Collaborative Task Force with IMTOs to double remittance inflows into the country, reporting directly to Governor Yemi Cardoso. Last month, the CBN granted 14 new Approvals-in-Principle (AIP) to IMTOs, as stated by Mrs. Hakama Sidi Ali, the Acting Director of Corporate Communications.