Nigeria’s central bank has directed International Money Transfer Operators (IMTOs) to begin remittances payout in naira to beneficiaries.
The apex bank has also directed that the Investors and Exporters (I&E) Window foreign exchange rate should be used in determining the rate for such Naira payout.
This is according to a CBN circular referenced: FED/FEM/PUB/FPC/001/004 issued by the Director of Trade and Exchange. Dr. Ozoemena Nnaji.
The new circular to all Deposit Money Banks (DMBs), IMTOs and the general public, dated July 10, 2023, according to CBN, was in furtherance to an earlier circular dated November 30, 2022, with reference number: FED/FEM/FPC/01/011 which provided guidelines on the payout policy of diaspora remittances to beneficiaries in Nigeria.
That November 30, 2022, circular introduced the payment of dollars to beneficiaries of diaspora remittances through the IMTO through the designated bank of their choice and with unrestricted access to their funds.
According to the new circular, the Naira payment was only an option, in addition to USD and eNaira in receiving diaspora remittances.
In a circular signed by Dr Nnaji, the CBN said the new policy was in furtherance of efforts to liberalise the payout of diaspora remittance.
Under the guidelines, the IMTOs are required to apply for a one-time “No-Objection” to pay out in eNaira from the Central Bank of Nigeria (CBN). The bank shall also provide account details where foreign currency from IMTOs shall be received.
The CBN however, stressed that the receipt of proceeds of diaspora remittance in eNaira remained optional, adding that the option of the digital currency payout shall run concurrently with the dollar payout.
This new July 10 circular reads:
“Further to the circular referenced FED/FEM/FPC/01/011 dated November 30, 2022, in respect of the above subject, the Central Bank of Nigeria hereby announces naira as a payout option for receipts of proceeds of International Money Transfers.
“Accordingly, all recipients of diaspora remittances through the CBN-approved International Money Transfer Operators (IMTOs) on the attached list shall henceforth have the option of receiving naira payment in addition to USD and eNaira as payout options.
“For the avoidance of doubt, IMTOs are required to pay out the proceeds using the Investors’ & Exporters’ window rate as the anchor rate on the date of the transaction.”
The CBN said the regulation takes effect immediately.
Attached to the circular is a list of 62 IMTOs, up from 57 in 2021.
The list includes platforms like Opay, Flutterwave, eTRANZACT, Interswitch, Moneygram, NIPOST, Paga, Paypal, Western Union, World Remit, and so on.
How would this help the naira?
Currently, Nigerians who receive remittances in foreign currency often have to exchange them before use, which puts upward pressure on the local currencies’ value. By allowing Nigerians to collect remittances in naira, the CBN will reduce the demand for foreign currency, which will help to stabilise the Naira’s value.
It will save Nigerians’ money on foreign exchange transaction fees. It is common knowledge that Nigerians who receive remittances in foreign currency have to pay foreign exchange transaction fees when they exchange it for local currency. By allowing Nigerians to collect remittances in naira, the CBN will save Nigerians money on these fees.
The new policy could also help to reduce the black market for foreign exchange in Nigeria.
People who receive remittances in foreign currency sell it on the black market, where they can get a better exchange rate. However, the CBN’s policy will make it easier and cheaper for people to exchange their remittances for Naira through legitimate channels, which could help to shrink the black market.
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