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A new directive by the Central Bank of Nigeria (CBN) mandating naira-based settlement for diaspora remittances marks a significant shift in Nigeria’s foreign exchange and payments framework, with far-reaching implications for households, market liquidity, and regulatory oversight.
Under the policy, all international money transfer operators (IMTOs) are required to open and utilise naira settlement accounts for remittance transactions. Effective May 1, beneficiaries of funds sent from abroad will receive payouts exclusively in naira, ending the longstanding practice of dollar-denominated disbursements.
The CBN said the move is aimed at deepening remittance inflows while improving transparency, traceability, and regulatory control within the foreign exchange market. Remittances remain a critical source of foreign exchange for Nigeria, supporting household consumption and contributing to external reserves. However, concerns have persisted over the rapid outflow of these funds from the domestic economy.
By enforcing local currency settlement, the regulator seeks to retain more value within the financial system and enhance monitoring of foreign exchange flows.
Director of the Trade and Exchange Department at the CBN, Musa Nakorji, emphasised that compliance is mandatory, noting that all IMTO transactions must be routed through designated naira settlement accounts maintained with authorised dealer banks.
The guidelines stipulate that these accounts are restricted in scope and can only receive remittance inflows and proceeds from foreign exchange conversions conducted through licensed operators and authorised market participants. IMTOs are also required to notify the CBN of all designated accounts and provide updates on any changes to ensure regulatory visibility.
To support liquidity and efficiency in the market, authorised dealer banks are permitted to transfer foreign currency from IMTO accounts to other approved participants, including bureau de change operators.
On pricing, the apex bank has introduced a market-aligned framework, directing IMTOs to benchmark their rates against real-time data from Bloomberg’s BMatch platform. This approach is expected to improve price discovery, reduce market distortions, and discourage the use of informal channels.
The directive also reinforces compliance with anti-money laundering (AML), counter-terrorism financing (CFT), and counter-proliferation financing (CPF) regulations, requiring operators to maintain detailed transaction records for audit and supervisory purposes.
Broader Cross-Border Payment Reforms
The remittance policy forms part of a wider effort by the CBN to modernise Nigeria’s cross-border payment ecosystem and align it with global standards.
CBN Governor, Olayemi Cardoso, highlighted the importance of efficient payment systems during the G-24 Technical Group Meetings in Abuja, noting that high transaction costs, settlement delays, fragmented systems, and complex compliance requirements continue to limit participation in global financial flows.
He observed that remittance costs globally still exceed six per cent on average, while transactions can take several days to complete—factors that constrain financial inclusion and economic growth.
In response, the CBN is pursuing reforms aimed at improving the speed, affordability, and accessibility of cross-border transactions. These include leveraging digital technologies, enhancing regulatory frameworks, and promoting participation in regional payment systems such as the Pan-African Payment and Settlement System.
At the same time, the regulator is balancing innovation with financial stability, acknowledging risks such as exchange rate volatility, capital flow pressures, and regulatory fragmentation.
“We have strengthened our Anti-Money Laundering and Countering the Financing of Terrorism frameworks in line with global standards,” Cardoso said, noting the introduction of stricter screening requirements for cross-border transactions.
Strengthening Global Compliance and Market Confidence
Nigeria’s recent removal from the grey list of the Financial Action Task Force (FATF) further reinforces the country’s reform trajectory.
The development signals improved compliance with international standards on anti-money laundering and counter-terrorism financing, enhancing Nigeria’s credibility in global financial markets and potentially lowering the cost of capital.
Industry stakeholders, including Aminu Gwadabe, President of the Association of Bureaux De Change Operators of Nigeria, have welcomed the move, citing its positive impact on investor confidence and market stability.
Fintech Growth and System Transformation
The remittance reforms come amid rapid growth in Nigeria’s financial technology ecosystem, which has emerged as one of Africa’s most dynamic innovation hubs.
According to the CBN, fintech is playing a transformative role in expanding access to financial services, enabling digital payments, and driving economic inclusion. Nigerian startups have continued to attract significant investment, reflecting strong global interest in the market.
Cardoso noted that digital finance remains central to the country’s development strategy, with the regulator committed to fostering innovation while maintaining robust oversight.
“We are committed to creating an environment where innovation thrives under prudent regulation and where financial inclusion reaches every segment of society,” he said.
A System in Transition
The shift to naira-based remittance settlement signals a broader transition within Nigeria’s financial system—one focused on transparency, efficiency, and inclusion.
While the policy represents a departure from past practices, it aligns with the CBN’s strategy to strengthen the domestic economy, improve monetary policy effectiveness, and build a more resilient financial architecture.
As implementation unfolds, the success of the reform will depend on stakeholder adaptation and the ability of the system to balance innovation with stability. For millions of Nigerians who rely on remittances, the policy introduces a new framework—one that could ultimately support a more integrated and efficient financial ecosystem.
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