The Central Bank of Nigeria (CBN) has shaken up the international money transfer landscape with a new set of guidelines, effectively barring banks and fintech companies from directly offering these services. This significant policy shift is outlined in the updated guidelines governing the operations of International Money Transfer Operators (IMTOs), officially disclosed on January 31, 2024.
This regulatory overhaul underscores the CBN’s commitment to strict adherence to guidelines and its intolerance for non-compliance. Immediate sanctions are set to be imposed on defaulters, reflecting the apex bank’s proactive regulatory stance.
The move aligns with a recent CBN circular aimed at curbing foreign currency speculation and hoarding by Nigerian banks, addressing concerns about activities that can distort market dynamics. The broader goal is to bring stability to the foreign exchange market, which has faced challenges due to the depreciation of the nation’s currency, the naira.
This move, designed to bolster the Naira and stabilize the forex market, raises questions about its impact on remittance flows and financial inclusion.
Key Changes:
- Banks and fintechs can no longer operate as International Money Transfer Operators (IMTOs). They can, however, act as agents for licensed IMTOs.
- Application fee for an IMTO license jumps from N500,000 to N10 million (a 1,900% increase). Annual renewal fee also set at N10 million.
- Minimum operating capital requirement for IMTOs raised to $1 million for foreign entities and its equivalent for local ones. This is a significant increase from previous amounts.
Potential Implications:
- Reduced competition in the IMTO market could lead to higher fees for consumers.
- Shifting the burden to licensed IMTOs might create processing delays or disruptions.
- Increased complexity for remittance senders, potentially impacting the flow of funds into Nigeria.
- Uncertain impact on financial inclusion, as fintechs were seen as key players in expanding access to financial services.
Underlying Rationale:
- Curb currency speculation and hoarding by banks.
- Stabilize the foreign exchange market and strengthen the naira.
- Ensure stricter regulatory oversight in the IMTO sector.
While the CBN’s intentions are understandable, the new regulations raise concerns about their potential consequences. Stakeholders, including remittance senders, financial institutions, and the fintech industry, will be closely watching how these changes unfold and their impact on the Nigerian economy.
