In a significant regulatory overhaul, the Central Bank of Nigeria (CBN) has taken a bold step by announcing a comprehensive ban on banks and financial technology companies (fintechs) participating in international money transfer services. The move, unveiled through new guidelines on January 31, 2024, marks a pivotal expansion of restrictions previously applicable solely to deposit money banks.

Revised Guidelines Restrict Bank and Fintech Participation

Under the revised guidelines, banks face stringent prohibitions from directly conducting International Money Transfer services but can continue serving as agents. Concurrently, fintech companies are now barred from seeking approval for IMTO, extending the ban to encompass individuals in bank management, shareholders, and officers. These regulatory measures underscore the CBN’s commitment to aligning with the provisions of the Banks and Other Financial Institutions Act (BOFIA) 2020, which imposes restrictions on specific individuals within banks.

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Significant Fee Hike and Stringent Licensing Requirements

In parallel, the CBN has implemented a substantial increase in the application fee for an International Money Transfer Operator (IMTO) license. The fee has skyrocketed from N500,000 in 2014 to a remarkable N10 million, marking an astounding increase of about 1,900% over the past decade. IMTOs seeking to operate in Nigeria are now mandated to furnish various documents, including a non-refundable application fee, evidence of tax clearance, and incorporation documents.

Minimum Operating Capital Requirements and CBN’s Focus on Market Stability

Additionally, the CBN has introduced a minimum operating capital requirement of $1 million for foreign IMTOs and an equivalent amount for local operators. This measure replaces the previous capital requirement of N2 billion for Nigerian companies and N50 million for foreign entities.

The regulatory reforms underscore the CBN’s commitment to stringent oversight and stability in the foreign exchange market. Aimed at curbing foreign currency speculation and hoarding among Nigerian banks, these measures contribute to ongoing efforts to stabilize the naira and ensure economic stability.

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Impact and Implications

While the reforms aim to bolster financial system integrity, they may introduce added complexity to remittance payments into Nigeria. The CBN emphasises a zero-tolerance approach to non-compliance, signalling immediate sanctions for defaulters. As stakeholders grapple with the implications, the Nigerian financial landscape witnesses a transformative regulatory shift.