International Money Transfer Operators (IMTOs) may sell foreign exchange in the official window as long as the value of the naira remains relatively stable, according to the Central Bank of Nigeria.
The Central Bank of Nigeria (CBN) has announced that eligible International Money Transfer Operators (IMTOs) will now have direct access to the foreign exchange (FX) window, either directly or through authorised dealer banks.
According to a circular issued by the CBN on Monday, these transactions will be conducted at the prevailing rates set by the Nigerian Autonomous Foreign Exchange Market (NAFEM). This move is expected to increase the ease and efficiency of foreign exchange transactions in the country and promote greater stability in the FX market.
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CBN Tightens its Remittance Policies
The circular also added that all licensed International Money Transfer Operators (IMTOs) are hereby reminded that all diaspora remittances received in foreign currencies must be fully converted to Nigerian Naira upon receipt.
Furthermore, the Naira equivalent of these remittances must be matched with the corresponding foreign currency inflows, ensuring a transparent and traceable transaction trail. This requirement is mandatory to maintain the integrity of the foreign exchange market and prevent any illicit activities.
This is the latest action taken by the regulator to promote remittance flows via official channels and lessen the influence of the black market. The regulator severely raised the capital requirements for Bureau de Change businesses in May and prohibited the street selling of dollars.
FX Reforms Create Much Needed-Stability
The Central Bank of Nigeria (CBN) introduced strict reforms, unifying the various currency exchange windows and allowing the naira to float freely against the US dollar.
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This move, which aimed to liberalise the foreign exchange market, also resulted in the clearance of a long-standing $7 billion FX deficit. Initially, the naira responded positively to these measures, appreciating in value.
However, the gains were short-lived, as the currency’s value later reverted to previous levels. Nevertheless, the increased foreign exchange inflows generated by these reforms have helped stabilise the naira in recent weeks, maintaining a relatively steady exchange rate despite earlier volatility.
On Monday, according to the latest available data on the NAFEM window, the naira traded at 1,488 per dollar. It changed hands at around 1,500 naira per dollar on the same day in the parallel market, according to reports. A $2.25 billion financial support package from the World Bank is also expected to boost FX liquidity.