Foreign exchange (FX) may now be sold on Nigeria’s official window by qualified International Money Transfer Operators (IMTOs), according to the Central Bank of Nigeria (CBN).
This regulation, which takes effect right away, is a component of the CBN’s strategy to guarantee higher remittance flows through official channels and boost the foreign currency market’s effectiveness.
The circular read: “As part of CBN’s commitment to the smooth functioning of the foreign exchange markets and enabling greater remittance flows through formal channels, the Bank has implemented measures that will enable eligible International Money Transfer Operators (IMTOS) access Naira (NGN) liquidity through the CBN. These measures are aimed at widening access to local currency liquidity for the timely settlement of diaspora remittances.
“Henceforth, 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.”
This move by the CBN comes at a time when the official market is struggling with FX liquidity. For about a month, the value of FX turnover on the NAFEM window has been between the range of $83 million and $390 million.
A similar move was made last month as the CBN allowed International Oil Companies (IOCs) to sell 50% balance of their repatriated export proceeds to authorized forex dealers.
The Guidelines
The CBN’s circular, signed by Dr W. J. Kanya, Acting Director of the Trade & Exchange Department, outlines several key points for compliance by IMTOs and Authorized Dealer Banks (ADBs).
One of the notable guidelines is the option for same-day settlement for transactions executed and confirmed before 12 noon on a trading date. This measure is expected to expedite the process and ensure quicker liquidity for remittance beneficiaries.
Additionally, the pricing for these transactions with the CBN will be determined based on prevailing NAFEM rates, ensuring transparency and adherence to a market benchmark.
The circular also emphasizes that this market segment will follow the existing arrangement for authorized dealers with Foreign Portfolio Investment, aligning it with the primary market securities auctions.
To maintain accountability and transparency, all participants are required to submit regulatory returns to the CBN daily. These returns must contain comprehensive information on the sources of funds.
Furthermore, IMTOs are instructed to confirm their partner banks and advise standard settlement instructions to ensure the smooth implementation of these measures.
