Nigeria: CBN Grants IMTOs Naira Access to Boost Remittances

The Central Bank of Nigeria (CBN) has issued a circular allowing International Money Transfer Operators (IMTOs) access to naira liquidity to increase remittance flows. The circular, signed by W. J. Kanya, Acting Director of the CBN’s Trade and Exchange Department, specifies that transactions completed before noon on any trading day will be settled the same day.

Additionally, the circular states that the pricing on the CBN portal will align with the Nigerian Autonomous Foreign Exchange Fixing (NAFEX) traded rates, which are based on an acceptable market benchmark. This move is part of the CBN’s ongoing efforts to ensure the smooth functioning of the foreign exchange (FX) markets and to promote greater remittance flows through official channels.

IMTOs facilitate the transfer of funds from individuals or entities outside Nigeria to recipients within the country through their clearing networks. In simple terms, IMTOs are financial institutions that offer cross-border money transfer services.

According to the FMDQ Group, the key participants in the Nigerian FX market include the CBN, authorised dealers (financial institutions licensed by the CBN to trade FX and make markets), and clients (retail or corporate financial market participants who buy or sell FX for personal or business needs). Prior to this policy, IMTOs were not active participants in Nigeria’s FX market. The latest CBN policy now greenlights them to become significant players.

The CBN has issued approval-in-principle to 14 IMTOs following an increase in the licence application fee. “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 this segment are the IMTOs, authorised dealer banks, and the CBN.

The circular mandates all participants to submit daily regulatory returns to the CBN, including all relevant information on the sources of funds.

In February 2024, the CBN 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 the CBN’s efforts to enforce transparency and increase forex inflows during a period of significant market volatility.