Financial experts have widely applauded the Central Bank of Nigeria’s (CBN) directive requiring international money transfer operators (IMTOs) to use naira settlement for remittances from the diaspora. They claim that this move will increase confidence in Nigeria’s financial system, strengthen foreign exchange (FX) security, and improve transparency.
The new policy mandates that all IMTOs open naira settlement accounts, route remittance inflows through these accounts, and provide local currency to beneficiaries. The rule, which goes into effect on May 1, essentially puts an end to decades of payouts to recipients in Nigeria that were made in dollars.
According to experts, the reform is a calculated move to prevent FX market leaks and guarantee that inflows from Nigerians living abroad are kept in the country’s financial system.
“Routing remittances through naira settlement accounts will improve traceability and reduce the arbitrage opportunities that previously encouraged speculative demand for foreign currency,” according to a financial analyst who commented on the development.
According to the CBN, the goal of the strategy is to increase diaspora remittances while improving FX management’s overall efficiency, monitoring, and transparency. The apex bank seeks to increase liquidity in the official market and deter parallel market activity by making sure that inflows are converted within the legitimate banking system.
What is stated in the updated circular?
All IMTOs must adhere rigorously to the new structure, according to Musa Nakorji, director of the CBN’s Trade and Exchange Department.
He stated, “All IMTOs are hereby directed to open naira settlement accounts and ensure that all transactions are routed strictly through their designated settlement accounts maintained with authorized dealer banks in Nigeria.”
The instructions provide that these accounts must be used exclusively for all foreign money transfer activities, including payouts to recipients. Additionally, IMTOs must inform the CBN of their selected settlement accounts and provide updates as needed.
The top bank made it clear that only remittance inflows and the revenues of FX conversions made with authorized participants in the Nigerian Foreign Exchange Market (NFEM) would be credited to such accounts.
Regarding pricing, the top bank directed IMTOs to compare their rates to current market prices on Bloomberg’s BMatch platform.
The CBN stated that “IMTOs shall observe real-time market prices from the Bloomberg BMatch and utilize this as guidance for pricing transactions with their customers and authorized dealers.”
According to the bank, the action would promote involvement in the official FX market, enhance price discovery, and lessen information asymmetry.
The regulator also urged the IMTOs to maintain appropriate documents for audit and regulatory review while adhering to anti-money laundering, counter-proliferation funding, and counter-terrorism financing (AML/CFT/CPF) regulations.
Experts predict that this centralization will lower the likelihood of illegal financial flows and greatly enhance control. Authorities can more effectively monitor transactions and enforce adherence to current restrictions by consolidating remittance processing within regulated channels.
Furthermore, the CBN has instructed IMTOs to match their exchange rates with Bloomberg’s BMatch platform’s real-time market data.According to analysts, this will lessen information asymmetry in the FX market and enhance price discovery.
Another market operator stated, “Benchmarking rates against a transparent platform like Match will help standardize pricing and discourage wide discrepancies that often fuel speculation.”
Beyond openness, stakeholders contend that by guaranteeing that remittance inflows are appropriately recorded inside the banking system, the regulation will bolster Nigeria’s foreign exchange reserves. Remittances from the diaspora continue to be one of the nation’s most reliable sources of foreign exchange, frequently outpacing government development assistance and foreign direct investment.\
Over time, the policy is anticipated to improve the stability of the naira and lessen the strain on physical foreign currency demand by doing away with cash-based dollar payouts.
The decision was issued in the midst of larger initiatives by the CBN, led by Governor Olayemi Cardoso, to update cross-border payment systems and restructure Nigeria’s foreign exchange regime.
Cardoso emphasized the need of effective payment systems in promoting financial inclusion and economic growth during his speech at the G-24 Technical Group Meetings in Abuja. He pointed out that involvement in international trade is still restricted, especially for consumers and small firms, due to high remittance costs, settlement delays, and disjointed payment systems.
He claims that in order to create a financial system that is more resilient and inclusive, digital cross-border payment changes are crucial.
In order to promote greater involvement in regional payment networks and ease intra-African trade, we have reinforced our Anti-Money Laundering and Countering the Fi policies and implemented streamlined KnowYourCustomer standards for low-value cross-border transactions.
According to experts, Nigeria will be better positioned for safe and effective cross-border financial flows when these measures are paired with the naira settlement directive.
Instead of setting their own remittance rates, IMTOs must use Bloomberg’s BMatch technology to determine current market values.
In an article titled “New CBN Measures On Diaspora Remittances: What They Mean For Market Participants,” Aderonke Alex-Adedipe and Promise Itah stated that the CBN hopes to ensure more accurate pricing, close information gaps between banks and IMTOs, and promote increased use of the official FX market.
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