CBN Moves to Double Foreign Currency Remittances, Grants AIP to 14 New IMTOs

•Naira appreciates on official FX to N1,459/$, falls to N1,540/$ on parallel market

James Emejo in Abuja and  Nume Ekeghe  in Lagos

The Central Bank of Nigeria (CBN) yesterday announced that it has granted 14 new International Money Transfer Operators (IMTOs) Approval-in-Principle (AIP) in a bid to double foreign currency remittances through formal channels.

The initiative also seeks to increase the sustained supply of foreign exchange (FX) in the official market by promoting greater competition and innovation among IMTOs to lower the cost of remittance transactions as well as boost financial inclusion.

This comes just as the naira yesterday, gained on the official FX window while it continued to decline on the parallel FX market.

At the Nigerian Autonomous Foreign Exchange (NAFEM) window, the naira closed at N1,459.02/$1, which was a N61.38 gain compared to the N1,520.40/$1 which it closed on Tuesday.

By the end of trading yesterday, the parallel market rate closed at N1,540/$1, which was a loss of N5 compared to N1,535/$1, which it exchanged on Tuesday.

The daily turnover recorded an increase in transactions of 124 per cent, to $289.14 million yesterday, compared to the $128.76 million recorded on Monday. 

The highest spot rate observed yesterday stood at N1,593, with the lowest spot rate recorded at N1,401

 CBN’s acting Director, Corporate Communications, Mrs. Hakama Sidi Ali, disclosed the granting of the AIP to 14 IMTOs in a statement.

She said formal remittance flows—a major source of FX inflows – accounted for over six per cent of Gross Domestic Product (GDP) and remained key to reducing the historical volatility in the country’s exchange regime largely induced by external factors such as fluctuations in foreign investment and oil export proceeds.

Sidi-Ali stressed that the entrance of more IMTOs would spur liquidity at the Nigerian Autonomous Foreign Exchange Market (NAFEX), and augment price discovery to enable a market-driven, fair value for the Naira.

CBN Governor, Mr. Olayemi Cardoso, recently declared, “We’ve set ourselves a target to double remittance flows into Nigeria within a year, a goal I firmly believe is within reach.

“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.”

However, the acting CBN director pointed out that the increase in the number of IMTOs remained one of the primary actions initiated by the apex bank remittance task force currently overseen by Cardoso.

The unit remains a collaborative unit pulling together specialists to work closely with the private sector and market operators to facilitate the ease of doing business in the remittance ecosystem in the country.

She said the task force was established as a direct result of an executive learning session with IMTOs during the World Bank/IMF Spring Meetings held in Washington DC in April.

She added, “This will spur liquidity in NAFEX, augmenting price discovery to enable a market-driven fair value for the naira.

“The CBN viewed increasing formal remittance flows—one of the major sources of foreign exchange, accounting for over six per cent of GDP—as a means of reducing the historical volatility in Nigeria’s exchange rate caused by external factors, such as fluctuations in foreign investment and oil export proceeds.”

In August 2023, the central bank unveiled draft operational rules and regulations for in-country clearing and settlement of foreign currency (FCY) fund transfers among Nigerian banks.

The move aimed to enable faster, cheaper, and more transparent FCY transfers and to create an efficient and safe operation of FCY transfers amongst Nigerian banks, and improve the efficiency of the in-country FCY transfers, leading to greater confidence in the payment system.

The central bank said the settlement of clearing balances shall be accorded the highest priority for settlement under the new regime.

The CBN said the regulation provides measures that would address some of the challenges facing the current system for switching FCY transfers among Nigerian banks including high cost associated with correspondent banking services, delay and inefficiencies with processing foreign remittances for third party including IMTOs.