The Central Bank of Nigeria (CBN) has issued a new directive requiring all Deposit Money Banks (DMBs) and International Money Transfer Operators (IMTOs) to pay diaspora remittances in Naira.

This directive was announced on Tuesday in a circular dated June 24, 2024 and signed by Dr. W. J. Him, the acting Director of the CBN’s Trade & Exchange Department.

The circular, addressed to all DMBs and IMTOs, stated that this measure is part of the CBN’s commitment to enhancing the efficiency of foreign exchange markets and encouraging greater remittance flows through formal channels.

Key Details of the Directive

According to the circular, the new policy will require IMTOs to access Naira liquidity directly from the CBN or through their Authorized Dealer Banks (ADBs).

This access is intended to facilitate the seamless execution of transactions for the sale of foreign exchange in the market.

The circular also specified that the CBN would offer same-day settlement for transactions confirmed before 12 noon on a trading date, and pricing for transactions would be based on prevailing Nigerian Autonomous Foreign Exchange Market (NAFEM) rates.

Also, the CBN mandated that all regulatory returns be submitted daily by participants, containing all relevant information on the sources of funds. IMTOs are required to confirm their partner banks and provide standard settlement instructions to ensure smooth implementation.

Supporting the Economy

CBN Governor, Mr. Olayemi Cardoso, reaffirmed the apex bank’s commitment to managing inflationary pressures through conventional monetary policies.

In an interview with Bloomberg in London, Cardoso highlighted recent positive trends in the market, including increased liquidity and improved confidence among market participants.

“We collectively committed to doubling remittance flows through formal channels into Nigeria in the immediate short to medium term,” Cardoso said.

He added that a collaborative task force reporting directly to him had been established to drive progress and address any obstacles to achieving this goal.

Broader Economic Impact

The new directive comes at a time when Nigeria’s economy is grappling with significant challenges. The country’s annual inflation rate reached a 28-year high of 33.95% in May 2024.

However, recent data indicates that month-on-month inflation has slowed for the third consecutive month, suggesting the effectiveness of the CBN’s monetary tightening measures.

The CBN has also taken steps to unify Nigeria’s exchange rate system, which Cardoso noted has helped stabilize the Naira.

“We more or less have one rate now, which allows companies to plan,” he said, emphasizing the importance of a predictable exchange rate for economic planning and investment.

Challenges and Future Outlook

Despite these efforts, the CBN’s new policy faces potential challenges, particularly in its implementation. Market participants must adapt to the new Naira payment requirement, and the CBN will need to monitor compliance closely to ensure the directive’s success.

Looking ahead, the CBN remains focused on achieving economic stability through coordinated monetary and fiscal policies.

Cardoso further emphasized the importance of collaboration in managing Nigeria’s macroeconomic fundamentals and providing the best value for the Naira.

The Monetary Policy Committee (MPC) will reconvene next month to review its policy options and chart the way forward for the economy.

The Central Bank of Nigeria (CBN) has reported a substantial increase in direct remittances, recording a 163% surge over the past five months.

The data reveals that remittances totaled $138.56 million in January, $39.14 million in February, $104.90 million in March, $193.31 million in April, and $365.44 million in May 2024.

This dramatic rise from April to May alone accounted for a 90% increase, amounting to an additional $172 million, culminating in a robust total of $365.44 million.

The CBN attributes this growth to strategic initiatives aimed at enhancing foreign currency remittance flows through formal channels.

The CBN has taken decisive steps to respond to various challenges that previously hindered these flows, including the in-principle approval of 14 new International Money Transfer Operators (IMTOs).

This move is designed to streamline processes, eliminate bottlenecks, and encourage more remittances through official avenues.

Sidi Ali, the Acting Director of Corporate Communications at the CBN, emphasized the bank’s commitment to facilitating smoother remittance transactions.

“We are wasting no time driving progress to remove any bottlenecks hindering flows through formal channels permanently. We have a determined pathway and a sequenced approach to tackling all challenges ahead, working hand in hand with key stakeholders in the remittance industry,” Ali stated.

The recent regulatory changes also played a pivotal role in this positive trend. In January 2024, the CBN removed the exchange rate cap previously imposed on IMTOs, allowing for more flexible currency quoting.

This regulatory adjustment was complemented by revised operational guidelines and increased licensing fees for IMTOs, underscoring the CBN’s efforts to bolster the sector’s operational standards and financial requirements.

This surge in remittances comes at a crucial time as Nigeria seeks to stabilize its economy amidst rising external debt obligations.

Recent reports indicate that the Federal Government spent $2.18 billion on debt servicing between January and May 2024, highlighting the significance of foreign exchange earnings from remittances.

The increase in remittance inflows aligns with broader economic strategies aimed at diversifying revenue sources away from oil-dependent revenues.

Despite focusing on domestic borrowing, Nigeria faces substantial external debt servicing obligations.

This fiscal challenge underscores the critical role of remittances in bolstering foreign exchange reserves and mitigating external debt pressures.

The CBN’s proactive measures and collaborations with IMTOs are expected to sustain this positive momentum in remittance inflows.

An economic expert at Lotus Beta Analytics, Shadrach Israel, noted that the substantial increase in direct remittances underscores the effectiveness of recent regulatory reforms and strategic initiatives by the CBN.

“These efforts not only enhance the transparency and efficiency of remittance channels but also contribute significantly to Nigeria’s economic resilience amidst evolving global economic landscapes,” Israel said.

The black market, also known as the parallel market or Aboki fx, US dollar to Nigerian Naira exchange rate as of June 24th, 2024 stood at 1 USD to ₦1,510.

Recent data from Bureau De Change (BDC) reveals that buyers in the Lagos Parallel Market purchased a dollar for ₦1,480 and sold it at ₦1,470 on Monday, June 18th, 2024.

This indicates a decline in the Naira exchange rate value when compared to today’s rate.

The black market rate plays a crucial role for investors and participants, offering a real-time reflection of currency dynamics outside official or regulated exchange channels.

Monitoring these rates provides insights into the immediate value of the Naira against the dollar, guiding decision-making processes for individuals and businesses alike.

It’s important to note that while the black market offers valuable insights, the Central Bank of Nigeria (CBN) does not officially recognize its existence.

The CBN advises individuals engaging in forex transactions to utilize official banking channels, emphasizing the importance of compliance with regulatory frameworks.

How much is dollar to naira today in the black market

For those navigating the currency exchange landscape, here are the latest figures for the black market exchange rate:

• Buying Rate: ₦1,510
• Selling Rate: ₦1,500

As economic conditions continue to evolve, staying informed about currency exchange rates empowers individuals to make informed financial decisions. While the black market provides immediate insights, adherence to regulatory guidelines ensures stability and transparency in forex transactions.