CBN grants IMTOs access to trade on official market

The Central Bank of Nigeria (CBN) says measures have been implemented to allow eligible international money transfer operators (IMTOs) access naira liquidity at the official window.

The CBN, in a circular on Monday, said the new measures will enhance local currency liquidity for the settlement of diaspora remittances.

They are also part of the regulator’s commitment to the smooth functioning of the foreign exchange (FX) markets and enabling greater remittance flows through formal channels, according to the circular.

“…the Bank has implemented measures that will enable eligible International Money Transfer Operators (IMTOS) access NGN liquidity at the CBN window. These measures are aimed at widening access to local currency liquidity for the settlement of diaspora remittances,” the CBN said.

“Therefore, eligible IMTO operators will be able to access the CBN window directly or through their Authorized Dealer Banks (ADBs) to execute transactions for the sale of foreign exchange in the market.”

The IMTOs are companies that provide cross-border money transfer services.

According to the CBN, they facilitate the transfer of funds from individuals or entities residing abroad to recipients in Nigeria and the payment of a corresponding sum to a beneficiary through a clearing network to which the IMTO belongs.

According to the FMDQ Group, key participants in the Nigerian FX market include the CBN, authorised dealers (financial institutions licensed by the CBN to trade FX and make markets in the Nigerian FX market), and clients (retail or corporate financial market participants who buy or sell FX to meet their day-to-day personal or business needs).

This means the IMTOs were not active players in Nigeria’s FX market — but the latest CBN policy now allows them to do so.

RULES FOR COMPLIANCE

Stipulating rules to guide the process and enable compliance, the CBN said “same day settlement” will be available for transactions executed “before 12 noon on a trading date”.

The bank said pricing on the CBN portal will be reflective of NAFEX traded rates “observable on an acceptable market benchmark”.

“The operation of this market segment follows the existing arrangement in place for authorized dealers with Foreign Portfolio Investment participating in the primary market securities auctions,” the regulator added.

“Regulatory returns to be submitted to the CBN by all participants on a daily basis, are mandatory and this is expected to contain all the relevant information on the sources of funds.

“Participants in this segment are the IMTOS, Authorized Dealer Banks and CBN. This circular is with immediate effect.”

In February, the CBN had asked the IMTOs to only make naira payments to recipients in Nigeria, removing the allowable limit of the FX rate quoted for such transactions.

The policy, which came at a time of serious volatility, was part of a series of moves by the CBN to encourage transparency, and for operators to have a more competitive FX market and increase supply into the country.

On April 20, Olayemi Cardoso, governor of the CBN, said the financial regulator has been collaborating with the IMTOs to collectively commit to doubling remittance flows through formal channels into Nigeria.

The CBN, on May 15, also granted approval in principle (AIP) to 14 new IMTOs.