N900 million minimum capital for IMTOs, here’s what the new CBN requirements mean for players

Temitope Akintade
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In a revised guidelines document released on Wednesday, the Central Bank of Nigeria (CBN) has established a minimum operating capital requirement for International Money Transfer Operators (IMTOs) at $1 million for foreign entities and an equivalent amount for local IMTOs.

IMTOs in Nigeria are companies/organisations authorised by the CBN to facilitate the transfer of funds from individuals or entities residing abroad to recipients in Nigeria. These operators play a vital role in the remittance process by providing secure and efficient channels for individuals to send money to their families, friends, or business partners in Nigeria.

Some of the authorized IMTOs operating in Nigeria include major international money transfer companies such as Western Union, MoneyGram, PayPalRia Financial, TransferWise, WorldRemit, PagaTech, Flutterwave, VFD, Interswitch, and others.

Prior to this new policy, foreign companies in the industry had to comply with the minimum capital requirement of N50,000,000 (Fifty million naira) while local companies needed to provide a capital of N2,000,000,000 (Two billion naira). 

But with this new requirement released on Wednesday, both foreign and local IMTOs must now provide $1 million capital before getting operational approval from the CBN, an amount equivalent to N900,000,000 (nine hundred million naira), using official rates.

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The CBN has been rolling out significant developments recently, in a bid to revive the country’s plummeting currency. The naira has depreciated over 40 per cent against the United States dollar since June 2023 when CBN floated the currency.

The new CBN guidelines 

The guidelines for IMTOs, released on Wednesday, say applicants must adhere to the CBN’s anti-money laundering and terrorism financing combat regulations. These regulations are detailed in the CBN guidelines for licensing banks and other financial institutions in Nigeria.

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IMTOs intending to operate in Nigeria are required to submit their applications to the director of the trade and exchange department, along with various documentation. The application will include a non-refundable application fee of N10 million, or an amount specified by the CBN, from time to time. 

Also, there is now a minimum capital share of $1 million for foreign IMTOs, with the equivalent for local ones. This is a significant difference from the earlier N50,000,000 (Fifty million naira) for foreign IMTOs and two billion naira for indigenous companies.

Other required documents for approval include invoice approval to operate in other jurisdictions or agency agreements, evidence of tax clearance, and incorporation documents for indigenous IMTOs.

Additionally, IMTOs are now required to undergo a renewal process subject to a fee of N10 million only, or an amount specified by the CBN, payable through electronic transfer or bank draft on or before the 31st of January each year, per the new guidelines.

Importantly, the renewal of IMTO approval licenses must be completed within the first quarter of every year. Failure to comply with this timeframe could have significant consequences for IMTOs, per CBN.

What these new requirements mean for players 

With the new guidelines, the CBN now prohibits commercial banks from directly operating IMTO services. Henceforth, banks can only act as agents. Also, Fintechs have been barred from obtaining approval.

What this means for the ecosystem players is that there will be a massive reduction in the number of licensed IMTOs. The new capital upfront of around 900 million naira instead of the earlier 50 million naira is expected to steer off more foreign IMTOs.

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Also, the reduction from two billion naira to barely one billion naira for local IMTOs will encourage more local participation, although some might say having the same requirements for local and foreign players is unfair. Thus, it could be argued that these new CBN guidelines underscore its commitment to fostering a robust financial environment.

The stringent measures aim to enhance transparency, accountability, and regulatory compliance within the international money transfer sector. IMTOs are also expected to provide any other information, documents, and reports specified by the CBN from time to time, signalling a heightened commitment to regulatory oversight in the financial sector. 

IMTOs are expressly prohibited from engaging in any other business beyond the stipulated permissible activities. Outbound transactions and the purchase of foreign exchange from the domestic foreign exchange market for settlement are strictly off-limits. All these are in a bid to reduce market manipulation as the CBN seeks measures to revive its ailing currency. 

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