In recent weeks, Nigeria’s foreign exchange market has seen more stability as licensed currency traders confirm that International Money Transfer Operators (IMTOs) are no longer Redirecting diaspora remittances beyond the established system.
This change has been related to the removal of profit margins in parallel transactions, which formerly promoted detours.
Along with increased inflows from oil corporations and growing investor confidence, The News Chronicle observed that the improved clarity in remittance flows has greatly helped the naira. Observers of the market point out that less hoarding and speculative behavior have helped to explain the good performance lately.
Licensed by the Central Bank of Nigeria (CBN) to manage fund transfers from Nigerians living abroad, IMTOs have previously been charged with Channels great remittances to unregistered platforms and fintech companies paying better rates. Many thought this distraction had aggravated Naira’s weakness and foreign exchange shortages. However, traders now claim that since margins between official and parallel markets have narrowed, such methods have greatly fallen.
Market participants also underline that the CBN’s active measures, together with greater dollar sales by oil companies, have raised liquidity and so helped to control speculation. The convergence of official and parallel market rates has eliminated, Aminu Gwadebe, President of the Association of Bureau De Change Operators of Nigeria, the incentive to deviate, which results in a more robust market structure.
Some operators still contend that a few IMTOs are still exploiting unofficial routes, even if the scope of such deviations has narrowed. Traders warn that keeping currency stability will need constant inflows from oil exports, diaspora remittances, and government supply management to prevent new pressure on the currency.
The CBN has instituted changes to help the industry, including updated rules for IMTOs that expand their scope from person-to-person to business-related transfers while excluding fintech companies from licensing. These initiatives should help to increase transparency and discipline when coupled with changes in the wider forex market.
Given the current momentum is kept, the naira’s prospects are bright with less speculative activity, a more active CBN, and bigger inflows from both oil revenues and remittances.
