Market News

The Central Bank of Nigeria (CBN) is cultivating major sources of FX to increase dollar inflows, boost access to manufacturers and retail end users. From moves to boost diaspora remittances through new product development, the granting licenses to new International Money Transfer Operators (IMTOs), implementing a willing buyer-willing seller FX model, and enabling timely access to naira liquidity for IMTOs, the apex bank has simplified dollar-inflow channels for FX dealers to boost business and economic growth.

Foreign capital inflows to the domestic economy remains crucial elements in the drive to achieve monetary and fiscal policy stability.

That explains the level of creativity, policy and hard work the Central Bank of Nigeria (CBN) under its Governor, Olayemi Cardoso puts in ensuring that more forex flows into the economy and remain accessible to businesses.

Diaspora remittances to Nigeria, estimated at $23 billion annually remain a reliable source of forex to the domestic economy. There are also other sources and policies that are being explored by the apex bank to keep dollar inflows coming.

The CBN’s initiatives have supported continued growth in these inflows, aligning with the institution’s objective of doubling formal remittance receipts within a year.

The remittances in the economy is expected to increase based on CBN’s ongoing efforts to bolster public confidence in the foreign exchange market, strengthen a robust and inclusive banking system, and promote price stability, which is essential for sustained economic growth.

Director of Trading at Verto, Charlie Bird, said dollar liquidity dynamic is now more balanced, with foreign investors and airlines able to repatriate funds.

Speaking during Cordros Asset Management seminar titled: “The Naira Playbook”, he said Nigeria is now darling of foreign investors because of improved dollar liquidity in the economy due to positive CBN’s reforms.

For instance, the CBN under Cardoso, recently announced the introduction of two new financial products designed to serve Nigerians living abroad and attract more diaspora remittances.

These and other measures, including the granting licenses to new International Money Transfer Operators (IMTOs), implementing a willing buyer-willing seller model, and enabling timely access to naira liquidity for International Money Transfer Operators (IMTOs).

X-raying revised IMTO guidelines

The CBN recently released the reviewed guidelines of International Money Transfer Services in Nigeria. These Guidelines mark a significant shift in how IMTOS conduct their operations, reflecting the CBN’s ongoing efforts to enhance transparency and efficiency in foreign exchange transactions and to bolster diaspora remittances into Nigeria.

Further circular titled “New Measures to Enhance Local Currency Liquidity for Settlement of Diaspora Remittances” highlighted the apex bank’s commitment to improving the Nigerian foreign exchange market infrastructure by increasing the flow of remittances through formal channels.

It introduces measures aimed at providing licensed IMTOs with access to Naira liquidity from the CBN, facilitating the disbursement of remittances to beneficiaries.

In a report analysing the circular, analysts at Duale, Ovia & Alex-Adedipe, a specialised law firm with leading experts in its core areas of practice, explained that the guidelines permit IMTOs to conduct payout foreign remittances through agents, who are designated as Authorised Dealer Banks (ADBs).

They require IMTOs to enter into formal contracts with ADBs outlining the terms and conditions of their engagement. Additionally, IMTOs are required to notify the CBN of the appointment of each ADB.

Furthermore, IMTOs are to receive foreign remittances in a designated account maintained with ADBs.

They explained that the account must be separate from other accounts held by the IMTO. The guideline mandates ADBs and IMTOs to disburse proceeds of foreign remittances to beneficiaries in Naira.

According to them, payments can be made either through a bank account with the ADB or in cash, provided the cash withdrawal does not exceed $200. If a beneficiary does not have an account with the IMTO’s ADB, the ADB will credit the beneficiary’s account with another bank. Notably, under the Guidelines, IMTOs are prohibited from purchasing foreign exchange from the domestic market to settle funds for their customers.

The major significance of the circular is the introduction of measures to enhance the access of IMTOS to Naira liquidity, thereby facilitating the timely settlement of diaspora remittances.

Here, eligible IMTOs can now directly access the CBN window or use their ADB to execute transactions involving the sale of foreign exchange in the Nigerian market.

This enables IMTOs to purchase Naira directly from the CBN or through their ADBs for settling remittances, thereby improving local currency liquidity. This contrasts with what was obtainable under the Guidelines as emphasized above.

To ensure effective implementation of the Circular and to promote transparency and accountability in the Nigerian foreign exchange market, the CBN established that transactions executed and confirmed before noon on a trading day are eligible for same-day settlement. This aims to expedite the process for all participants, including remittance beneficiaries.

The apex bank also directed that foreign exchange will be converted at the prevailing Nigerlan Autonomous Foreign Exchange Market (NAFEM) rates, as referenced by a recognized market benchmark.

Also, IMTOS and ADBs must submit daily regulatory returns to the CBN, detailing all relevant information on the sources of funds while eligible IMTOs must confirm their ADBs and provide standard settlement instructions to ensure smooth implementation of the new measures.

Analysts said the circular remains a significant advancement in ensuring foreign exchange liquidity in Nigeria.

By granting IMTOs direct access to obtain Naira through the CBN window or through ADBs and implementing strict regulatory and reporting requirements, the CBN aims to enhance the efficiency and operations of IMTOs in the Nigerian market. These measures will streamline remittance flows, ensuring that funds move swiftly and securely through official channels.

All eyes on diaspora remittances

As part of its efforts to boost diaspora remittances and support naira stability, the CBN recently announced the introduction of two new financial products designed to serve Nigerians living abroad.

The Non-Resident Nigerian Ordinary Account and the Non-Resident Nigerian Investment Account was created to streamline remittances, encourage investments, and foster financial inclusion among Nigerians in the diaspora.

It said, “The Central Bank of Nigeria is pleased to inform the general public of the introduction of the Non-Resident Nigerian Ordinary Account and Non-Resident Nigerian Investment Account targeted at Nigerians in diaspora.”

The initiative is also expected to provide a secure and efficient platform for managing funds and investing in Nigeria’s financial markets.

Since the beginning of this year, eligible NRNs have continued to get the opportunity to own any of the Non-resident Nigerian accounts.

The Non-Resident Nigerian Ordinary Account was designed to facilitate remittances by allowing non-resident Nigerians to remit foreign earnings into Nigeria and manage funds in foreign currency or naira.

Deposits from sources such as salaries, allowances, and dividends are supported, alongside spending on family maintenance, education, and healthcare.

On the other hand, the Non-Resident Nigerian Investment Account provides an opportunity for NRNs to invest in Nigeria’s financial markets, including foreign currency-denominated bonds, fixed deposits, and local assets like equities, government securities, and mortgage products.

The CBN explained that both accounts offer currency flexibility, enabling holders to maintain balances in either foreign currency or naira.

Account holders will also be able to convert funds between the two currencies at prevailing exchange rates through authorised dealers.

The Non-Resident Nigerian Investment Account, in particular, was structured to promote investments in Nigeria’s financial instruments, such as the Diaspora Bond, and encourage active participation in the country’s economic development.

The CBN said the introduction of these accounts will harness the economic potential of Nigerians in the diaspora by boosting remittances and fostering investments in critical sectors.

These and other measures, including the granting licenses to new International Money Transfer Operators (IMTOs), implementing a willing buyer-willing seller model, and enabling timely access to naira liquidity for International Money Transfer Operators (IMTOs).

President, Association of Bureaux De Change Operators of Nigeria, Dr. Aminu Gwadabe, explained that diaspora remittances are a crucial source of foreign exchange for Nigeria, supplementing both foreign direct investment and portfolio investments.

He CBN’s initiatives have supported continued growth in these inflows, aligning with the institution’s objective of doubling formal remittance receipts within a year.

Gwadabe remittances in the economy is expected to increase based on CBN’s ongoing efforts to bolster public confidence in the foreign exchange market, strengthen a robust and inclusive banking system, and promote price stability, which is essential for sustained economic growth.

In a report: “Diaspora remittances: The power behind Africa’s sustainable growth”, Regional Vice President of Africa at Western Union, Mohamed Touhami el Ouazzani, said remittances may be measured through the movement of money, but their real impact is measured in lives changed.

He disclosed that in 2023 alone, $90 billion flowed into Africa from its global diaspora, an amount that rivals the Gross Domestic Product of entire nations.

He said that remittances symbolize deep ties that keep communities connected across borders. “Families with a breadwinner working abroad depend on these funds to provide vital support for day-to-day needs. They also build the foundation for broader financial stability,” he said.

“Beyond their immediate impact, remittances are powerful drivers of economic change. They fuel infrastructure development, spur entrepreneurship, and promote financial inclusion – all essential for long-term economic development. Ghana’s National Financial Inclusion and Development Strategy (NFIDS) is simplifying access to remittances, while countries like Kenya, Ethiopia and Nigeria are tapping into diaspora bonds to fund infrastructure and other national projects,” he added.

For remittances to be truly transformational, it begins with understanding and meeting people’s aspirations. Ensuring individuals who strive for more can send and receive funds, regardless of their financial status, is crucial. We must cater to diverse needs.

“In a continent renowned for its entrepreneurial spirit, offering multiple channels for remittance access is key. Whether through bank accounts, digital wallets, mobile money apps, or cash pickups, this flexibility ensures that funds are delivered in ways that best suit local realities. Providing innovative and inclusive solutions empowers individuals to not only manage their immediate needs but also to invest in long-term growth opportunities,” he added.

According to him, every remittance is a seed of change – a deliberate investment in a future where borders blur.

“The future of remittances in Africa transcends mere financial support. By strategically directing funds into sectors that need them most, Africa’s diaspora is not just sending money home; they are building resilient economies and challenging traditional models of progress.”

“This power demands that we unite with purpose, reimagine prosperity and empower future generations. The question then becomes whether we are prepared to unlock the continent’s true potential and reshape the global narrative of success,” he stated.

Meanwhile, recent data from the International Monetary Fund (IMF’s) Currency Composition of Official Foreign Exchange Reserves (COFER) also point to the rise of nontraditional reserve currencies, including the Australian dollar, Canadian dollar, Chinese renminbi, South Korean won, Singaporean dollar, and the Nordic currencies.

Stakeholders agreed the measures instituted by the CBN under Cardoso have not only lifted the forex market and entrenched long-lasting stability but laid foundation for sustainable economic growth.