CBN Permits IMTOs to Sell FX
By Patience Ikpeme
The Central Bank of Nigeria (CBN) has permitted International Money Transfer Operators (IMTOs) to sell foreign exchange directly on the Nigerian Autonomous Foreign Exchange Market (NAFEM).
This major policy shift is to enhance remittance flows and improve foreign exchange (FX) liquidity within the country’s official market. The directive takes immediate effect.
This was announced in a circular signed by Dr. W. J. Kanya, Acting Director of the Trade and Exchange Department. It will encourage the use of formal channels for diaspora remittances. Previously, IMTOs were barred from accessing FX in the official market. The CBN expects this policy change to substantially increase recorded remittance inflows by routing transactions through official channels.
By enabling IMTOs to sell foreign exchange on the NAFEM window, the CBN aims to increase the overall supply of FX in the official market. This is expected to help stabilize exchange rates and reduce pressure on the parallel market, which has been struggling with liquidity issues.
The circular outlined several key guidelines for these transactions. Transactions confirmed before noon will be settled on the same day, ensuring faster access to naira for remittance beneficiaries. Foreign exchange will be sold at prevailing NAFEM rates, promoting transparency and adherence to market benchmarks and all participants, including IMTOs and Authorized Dealer Banks (ADBs), must submit daily reports to the CBN to ensure accountability.
The CBN emphasized that this new market segment will operate under existing regulations for authorized dealers dealing with Foreign Portfolio Investment, ensuring consistency with established market practices. The policy is part of a broader strategy to boost remittance inflows and improve the efficiency of the FX market.
This policy shift is the latest in a series of CBN initiatives to enhance remittance flows. Recent actions include the formation of a task force with IMTOs to develop strategies for doubling remittance inflows. Last month, the CBN granted 14 new approvals-in-principle (AIP) to IMTOs, expanding the pool of licensed operators.
The CBN’s new policy holds promise for several positive outcomes. By making formal channels more attractive, the CBN expects a significant rise in recorded remittance flows. Allowing IMTOs to sell FX in the official market is likely to increase FX supply, potentially stabilizing exchange rates. Additionally, faster naira settlement for beneficiaries will improve access to local currency, and the clear guidelines and regulatory reporting will enhance transparency in remittance transactions.
