The Central Bank of Nigeria (CBN) has announced new policies that it is implementing right now in an effort to increase remittances from the diaspora and increase naira liquidity.
The top bank gave Deposit Money Banks (DMBs) and International Money Transfer Operators (IMTOS) instructions to settle all remittances from the diaspora in Naira and to match any future inflows of foreign currency in the same amount. This came as Mr. Olayemi Cardoso, the governor of the CBN, reiterated on Tuesday the MPC’s resolve to control inflationary fears through traditional means.
In a circular issued by CBN acting Director of Trade and Exchange Department Dr. W. J. Him dated June 24, 2024, the central bank revealed its mandate to all DMBs and IMTOS to settle all diaspora remittances in Naira.
The apex bank noted that the move was part of CBN’s commitment to the smooth functioning of the foreign exchange markets and enabling greater remittance flows through formal channels.
Specifically, the central bank pointed out that it has implemented measures that would enable eligible IMTOs to access Naira liquidity through the apex bank.
Consequently, the CBN said henceforth, eligible IMTO operators would be able to access the CBN window directly or through their Authorised Dealer Banks (ADBs) to execute transactions for the sale of foreign exchange in the markek.
According to its latest circular, the apex bank said eligible International Money Transfer Operators (IMTOs), will now have access to naira liquidity through the bank’s window.
The central bank disclosed its directive to all DMBs and IMTOS to pay all diaspora remittances in Naira in a circular dated June 24, 2024, that was signed by the CBN acting Director, Trade & Exchange Department, Dr. W. J. Him, which was addressed to all DMBs and IMTOS.
The apex bank noted that the move was part of CBN’s commitment to the smooth functioning of the foreign exchange markets and enabling greater remittance flows through formal channels.
This initiative is designed to widen access to local currency liquidity, ensuring smoother and more efficient settlement processes for remittances, the CBN said.
According to the circular, all participants are required to submit daily regulatory returns to the CBN. These returns must include all relevant information on the sources of funds. The key participants in the segment include: IMTOs, authorised dealer banks, and the CBN.
Under the new guidelines, IMTO operators will be able to directly access the CBN window, or do so via their Authorised Dealer Banks (ADBs) to execute foreign exchange transactions in the market. The circular outlines specific compliance measures to ensure the effective operation of the initiative.
It also said pricing on the CBN portal will mirror the NAFEX traded rates, which are based on an acceptable market benchmark.
The operation of the segment will follow the existing arrangements in place for authorised dealers involved with foreign portfolio investment in primary market securities auctions.
The circular emphasised that these measures are effective immediately, highlighting the bank’s commitment to maintaining the smooth functioning of the foreign exchange market and improving formal remittance channels.
The decision is expected to significantly improve the liquidity of local currency for diaspora remittances, thereby enhancing the overall efficiency and reliability of the foreign exchange market in the country.
The CBN has focused on increasing remittances and naira liquidity. This is as in May 2024, the bank granted 14 IMTOs an approval-in-principle (AIP) in an effort to double foreign-currency remittance inflows through formal channels.
“This will spur liquidity in Nigeria’s Autonomous Foreign Exchange Market (NAFEX), augmenting price discovery to enable a market-driven fair value for the naira,” said Hakama Sidi Ali, CBN’s Acting Director of Corporate Communications, while announcing the new plan in a statement.
The CBN Governor, Olayemi Cardoso, had recently disclosed the apex bank’s target to double remittance flows into Nigeria within a year, which he firmly believed was possible.
He said, “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.”
