The Central Bank of Nigeria (CBN) last week announced significant measures to enhance foreign exchange (forex) liquidity by enabling eligible International Money Transfer Operators (IMTOs) to access naira liquidity at the official window.
This initiative, detailed in a circular issued on Monday, is part of a broader effort to bolster the settlement of diaspora remittances and ensure the smooth functioning of FOREX markets. The CBN’s new policy allows IMTOs to access the central bank’s window either directly or through Authorized Dealer Banks (ADBs) to execute forex transactions.
These operators, which facilitate cross-border money transfers, can now play a more active role in Nigeria’s forex market. The move aims to improve local currency liquidity and enhance remittance flows through formal channels.
“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 CBN stated.
Previously, IMTOs were not prominent players in Nigeria’s FOREX market, which primarily involved the CBN, authorised dealers (licensed financial institutions), and clients (retail or corporate entities). This policy shift is designed to integrate IMTOs into the forex market, enhancing liquidity and market stability.
To ensure compliance and effective operation, the CBN has established guidelines for “same day settlement” for transactions executed before 12 noon on a trading date. The pricing on the CBN portal will reflect NAFEX traded rates, observable on an acceptable market benchmark. Additionally, regulatory returns from all participants are mandatory and must include detailed information on the sources of funds.
This circular took immediate effect, with authorized dealers and the CBN overseeing transactions involving IMTOs. Earlier this year, the CBN had mandated IMTOs to make naira payments to recipients in Nigeria, removing limits on FOREX rates for such transactions. This policy aimed to enhance transparency and competitiveness in the FOREX market.
CBN governor Dr. Olayemi Cardoso highlighted the significance of remittance flows, which account for about 6 per cent of Nigeria’s GDP. During the last Monetary Policy Committee (MPC) meeting, he stressed the importance of a strategy to engage the IMTO sector.
“We have identified, of course, this is a very critical element of the inflows coming into the country. It is estimated to represent about 6 percent of our GDP. And so, we felt that it was important from the central bank perspective to have a strategy to engage this sector,”he said.
Cardoso had detailed efforts to engage IMTOs through virtual meetings and in-person discussions during World Bank and IMF meetings. These engagements aimed to address challenges faced by IMTOs, particularly regarding pricing, commissions, and exchange rates.
The CBN’s strategy includes establishing a task force, reporting directly to Governor Cardoso, to ensure progress in doubling remittance flows within a year. Recently, the CBN granted approval in principle (AIP) to 14 new IMTOs, fostering competition and aiming to reduce transaction costs.
On April 20, Olayemi Cardoso, governor of the CBN, said the financial regulator has been collaborating with the IMTOs to collectively commit to doubling remittance flows through formal channels into Nigeria.
This initiative reflects the CBN’s commitment to leveraging technology and refining regulations to boost FOREX liquidity and strengthen Nigeria’s economy through increased remittance flows.
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