The Central Bank of Nigeria (CBN) has issued additional guidelines for diaspora remittances in the country citing infractions of its previous circular.
According to the apex bank, despite spelling out procedures “regrettably, a few operators continue to pay remittances in local currency contrary to the regulatory directive” which requires that remittances be paid in US dollars.
Based on this, the new guidelines now stops International Money Transfer Operators (IMTO) from sending money to Mobile Money Operators and also stopped the integration of payment services providers to IMTO accounts. It also stopped switches and processors from getting involved in foreign remittances.
In light of this, the CBN hereby provides the following additional operational guidelines:
Switches and Processors should immediately cease all local currency transfers in respect of foreign remittances through IMTOs.
- All MMOs are required to immediately disable wallets from receipt of funds from IMTOs.
- Payment service providers are directed to cease integrating their systems with IMTOs going forward and must prevent comingling of remittances with other legitimate transactions.
- All IMTOs are required to immediately disclose to beneficiaries that they exercise discretion to receive transfer in foreign currency cash or directly into their domiciliary accounts.
- A central reporting portal for all foreign remittances to be managed by the Nigerian Interbank Settlement System (NIBSS) is currently under development to improve visibility of foreign remittance flows.
From the circular, it appears the central bank believes Nigerians are still receiving foreign remittances in naira instead of foreign currency as stipulated.
- The latest circular now bans payment service providers (POS Machine operators), Mobile Money Operators, Switches, and Processors (like Interswitch, Flutterwave) from receiving diaspora remittances.
- It has now gone further by cutting off whatever integration they may have had to IMTOs effectively cutting off a major source of revenues for them.
- It also means anyone who wants to receive foreign remittance will only have the option of receiving it in cash or in a domiciliary account. They can no longer receive it in an online Wallet as they used to.
Why the CBN is doing this
The latest circular is purely targeted at controlling the distribution of dollars in the economy and eliminating what it believes to be arbitrage.
- The CBN believes if dollar remittances are paid directly to Nigerians, they will, in turn, sell at the black market, injecting much-needed supply that could help stabilize the exchange rate.
- Before now, remittances were paid in naira while, the local agents who receive could hoard the forex in the hope that they can sell when the naira depreciates further.
- It is unclear if the latest move by the CBN will work, however, the exchange rate has remained stable at N470/475 to $1 since it issued the first circular.