Economic experts have commended the Central Bank of Nigeria on its latest decision to allow eligible International Money Transfer Operators (IMTOs) to sell foreign exchange directly on the Nigerian Autonomous Foreign Exchange Market (NAFEM).
The experts said the decision is likely to encourage foreign exchange inflows in the long term by increasing market efficiency and transparency, and by offering better rates to those using official channels. The development represents a positive step toward integrating Nigeria’s forex market with global practices and could lead to a more stable and robust forex environment, benefiting the economy as a whole, the economic experts say.
However, the experts warn that the CBN and relevant authorities must closely monitor the implementation process to address any challenges swiftly and ensure the policy achieves its intended goals without unintended negative consequences.
The central bank had directed Deposit Money Banks (DMBs) and IMTOs to pay all diaspora remittances in Naira and match with the corresponding foreign currency inflows going forward.
By the new directive of the apex bank, all eligible IMTOs will now have direct access to naira liquidity through the apex bank’s window or via their Authorised Dealer Banks (ADBs), which will enable operators to execute foreign exchange transactions in the market.
“It will increase the supply of forex,” said economic policy analyst Stephen Kanabe, adding that it could also help stabilise the exchange rate by narrowing the gap between the official and parallel market rates.
Kanabe said direct sales by IMTOs can reduce the layers involved in forex transactions, leading to more transparent and efficient forex markets. “This can boost confidence among remitters and recipients, encouraging more people to use official channels for their transactions.”
Many also think that the new policy could incentivise more Nigerians in the diaspora to remit money home through official channels, knowing that their funds can be exchanged at more competitive rates. This could lead to an increase in remittance inflows, which are a significant source of forex for Nigeria.
Professor of economics at the University of Benin, Hassan Oaikhenan, said the increased supply of forex through official channels would reduce the demand in the parallel market, potentially leading to a decline in the parallel market rate. “While this is generally positive, it could also make the parallel market less attractive, which may affect those who rely on it for their transactions,” he said yesterday.
Industry watchers described the move as a significant step towards improving remittance flows into the country. This move is also expected to widen access to local currency liquidity, making it easier for recipients to convert their remittances into naira.
However, the experts agree on the fact that the transition period could see some volatility in the exchange rate as market participants adjust to the new system. They said the uncertainty might temporarily discourage some forex inflows.
Another area of concern is that the IMTOs might face initial challenges adapting to the regulatory and operational requirements of selling directly on the AFEM. Any delays or inefficiencies in this process could temporarily slow down forex inflows.