On Monday, the Central Bank of Nigeria (CBN) announced fresh initiatives aimed at increasing naira liquidity and diaspora remittances.
Eligible International Money Transfer Operators (IMTOs) will now have access to naira liquidity through the bank’s window, per the CBN’s most recent circular. According to the CBN, the goal of this program is to increase access to local currency liquidity and facilitate faster and more effective remittance settlement procedures.
To conduct foreign exchange transactions in the market, IMTO operators will be able to do so either directly through the CBN window or through their Authorised Dealer Banks (ADBs). The circular provides certain compliance guidelines to guarantee the effort runs smoothly.
Transactions completed before noon on a trading day will be resolved that same day, according to the circular, which was signed by W. J. Kanya, acting director of the CBN’s trade and exchange department.
Additionally, it stated that the CBN portal’s pricing will be in line with NAFEX trading rates, which are determined by a respectable market benchmark.
The section will function by the current policies set forth for authorized dealers participating in foreign portfolio investments in primary market securities auctions.
Every participant must provide the CBN with daily regulatory returns, per the circular. All pertinent information on the funding sources must be included in these returns.
Authorised dealer banks, the CBN, and IMTOs are the main players in this market.
The circular underscored the bank’s commitment to preserving the seamless operation of the foreign exchange market and enhancing official remittance channels by stressing that these measures are effective immediately.
The action is anticipated to greatly increase local currency liquidity for remittances from the diaspora, improving the overall effectiveness and dependability of the nation’s foreign exchange market.
The CBN has prioritized raising naira liquidity and remittances.
It gave approval-in-principle (AIP) to 14 IMTOs in May 2024 in an attempt to double the amount of foreign-currency remittance inflows through official channels.
By encouraging greater competition and innovation among IMTOs to reduce the cost of remittance transactions and promote financial stability, the initiative aimed to help strengthen the sustained supply of foreign exchange in the official market.
The CBN reasoned that boosting official remittance flows would lessen the historical volatility of Nigeria’s currency rate, which was brought on by outside variables including changes in foreign investment and the revenues from oil exports.
“This will increase price discovery to enable a market-driven fair value for the naira and spur liquidity in Nigeria’s Autonomous Foreign Exchange Market (NAFEX),” CBN’s Acting Director of Corporate Communications, Hakama Sidi Ali, stated in a statement announcing the new strategy.
The governor of the CBN, Olayemi Cardoso, recently revealed the goal of the top bank, which he was adamant was achievable: to quadruple remittance flows into Nigeria in a year.
“We are wasting no time driving progress to remove any bottlenecks hindering flows through formal channels permanently. We have a clear path and a step-by-step strategy for addressing all upcoming difficulties, and we are collaborating with key stakeholders in the remittance business,” he concluded.
