The news:
- On Monday, June 25, 2024, the Central Bank of Nigeria (CBN) announced new measures to increase access to local currency liquidity for seamless settlement of diaspora remittances.
- Per the latest guidelines, all eligible International Money Transfer Operators (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.
- The latest circular outlines specific compliance requirements to ensure the new CBN initiative operates smoothly.
The circular, signed by W. J. Kanya, Acting Director of CBN’s Trade and Exchange Department, notes that all transactions completed before noon on any trading date will be settled on the same day.
Additionally, it states that pricing on the CBN portal will be the same as the Nigerian Autonomous Foreign Exchange Fixing (NAFEX) traded rates, which are based on an acceptable market benchmark.
The new development is also part of the CBN’s continued commitment to ensure the smooth functioning of the foreign exchange (FX) markets and enable greater remittance flows through official channels.
According to the CBN, IMTOs are companies that facilitate the transfer of funds from individuals or entities outside Nigeria to recipients within Nigeria through a clearing network they are a part of.
Simply put, IMTOs are financial institutions that offer cross-border money transfer services.
However, the FMDQ Group describes key participants in the Nigerian FX market to include the CBN, authorised dealers (financial institutions licensed by the CBN to trade FX and make markets in the Nigerian FX market), and clients (retail or corporate financial market participants who buy or sell FX to meet their daily personal or business needs).
Going by that, IMTOs were not active participants in Nigeria’s FX market before now, but the latest CBN policy greenlights them to become players.
“The operation of this market segment follows the existing arrangement in place for authorized dealers with Foreign Portfolio Investment participating in the primary market securities auctions,” the regulator added.
The key participants in the segment are the IMTOs, authorised dealer banks, and the CBN.
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The circular mandates all participants to submit daily regulatory returns to the CBN, complete with all relevant information on the sources of funds.
In February 2024, the apex bank directed IMTOs to make only naira payments to recipients in Nigeria, removing the allowable limit of the FX rate quoted for such transactions. This policy was part of CBN’s attempt to enforce transparency and increase forex inflow at a time of serious volatility.
