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In a significant move, the Central Bank of Nigeria (CBN) has unveiled new regulations for international money transfer operators (IMTOs), aiming to improve liquidity in the country’s volatile foreign exchange (FX) market and attract more diaspora remittances and foreign capital inflows.
Key changes in the revised guidelines, published on Wednesday, include:
- Banks and fintech startups barred from direct IMTO operations: The CBN now prohibits banks and fintech companies from directly conducting international money transfers. This move targets entities like Flutterwave, LemFi, PagaTech, VFD, and Interswitch, previously licensed as IMTOs. It remains unclear whether existing licenses will be revoked.
- Stricter licensing requirements: The application fee for IMTO approval jumps to N10 million (approximately $6,845), and both foreign and local IMTOs must now boast a minimum operating capital of $1 million and its naira equivalent, respectively.
- Commercial banks as agents: Though barred from direct operations, banks can still act as agents for licensed IMTOs.
- No more FX transaction caps: The CBN removes the ceiling on FX transactions, allowing IMTOs to use the prevailing market rate at the official window.
Justifications and potential impacts:
- Boosting liquidity: The CBN describes these measures as “liberalizing the FX market and ensuring transparency,” aiming to increase dollar availability and stabilize the naira.
- Promoting competition: With established players potentially sidelined, new specialized IMTOs may emerge, fostering competition and potentially lowering transfer fees.
- Diaspora remittances: Easier and more efficient remittance channels could encourage higher inflows, a crucial source of foreign exchange for Nigeria.
Market reactions:
- The new regulations have generated mixed reactions. Some stakeholders welcome the potential for a more efficient and transparent market, while others express concerns about the impact on existing players and competition.
Overall, the CBN’s move signals a bold attempt to address Nigeria’s FX challenges. While the long-term impact remains to be seen, these changes are likely to significantly reshape the international money transfer landscape in the country.
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