The Central Bank of Nigeria has moved to tighten oversight of diaspora inflows, directing all international money transfer operators (IMTOs) to route transactions through designated naira settlement accounts in banks in a bid to improve transparency and deepen liquidity in the official foreign exchange market.

Musa Nakorji, the Trade and Exchange Department Director, signed the circular to all IMTOs, authorised dealer banks and the general public titled, “Measures to Further Enhance Compliance in the Remittance Space”.

Mandatory settlement through authorised dealer banks

The directive requires IMTOs to ensure that all remittance transactions, including beneficiary payments and related settlements, are processed strictly through accounts maintained with authorised dealer banks in the country.

The move marks a significant shift in the regulation of remittance flows, effectively closing gaps that previously allowed funds to move through less traceable channels and reinforcing the apex bank’s push to channel foreign exchange inflows into the formal market.

Flexible account management for transfer operators

Under the new rules, IMTOs are required to either designate existing accounts or open new naira settlement accounts. They have the flexibility to operate multiple accounts across different authorised dealer banks in line with their business strategies.

All remittance inflows and proceeds from foreign exchange conversions must be credited exclusively into these accounts. The Central Bank said the measure is aimed at strengthening transparency, traceability and monitoring of diaspora remittances, a critical source of foreign exchange for Africa’s largest economy.

Real-time pricing via Bloomberg BMatch

In a further step to improve pricing discipline in the market, the CBN directed IMTOs to reference real-time rates from Bloomberg BMatch when pricing transactions. The measure is expected to improve price discovery, reduce information asymmetry between banks and transfer operators, and encourage greater participation in the official foreign exchange market.

Authorised dealer banks have also been permitted to process foreign currency transfers from IMTO settlement accounts to other banks and approved market participants, including licensed bureau de change (BDC) operators, a move seen as enhancing liquidity distribution across the system.

Capturing inflows to curb parallel market leakages

By ensuring that remittance inflows are fully captured within the banking system, the regulator is seeking to boost supply, curb leakages into the parallel market and improve overall market efficiency.

The circular also reinforces compliance obligations, requiring IMTOs to maintain detailed transaction records for regulatory review and adhere strictly to anti-money laundering, counter-terrorism financing and counter-proliferation financing standards.

Transition window for compliance

The directive is scheduled to take effect from May 1, 2026, giving operators a transition window to align their systems and processes with the new requirements.

The apex bank issued revised guidelines for international money transfer services in Nigeria on January 31, 2024, providing a framework for the licensing and operations of IMTOs in the country.

Stabilising the foreign exchange market

“As part of ongoing efforts to enhance diaspora remittances, strengthen transparency, traceability and ensure effective monitoring of all transactions, this circular is hereby issued,” the bank said.

The latest move highlights the Central Bank’s increasing reliance on administrative measures to stabilise the foreign exchange market, as policymakers balance the need for liquidity with efforts to restore investor confidence and ensure orderly market functioning. (BusinessDay)

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