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.
