Nigeria’s Central Bank Restricts Banks and Fintechs from International Money Transfer Operations

The Central Bank of Nigeria (CBN) has introduced policy reforms aimed at improving liquidity in the nation's foreign exchange (FX) market. According to the new regulations, both banks and fintech startups are now prohibited from engaging in international money transfer operations. Furthermore, the CBN has increased the application fees for International Money Transfer Operator (IMTO) approval to N10 million ($6,845). These rules, representing amendments to guidelines established in 2014, also mandate a minimum operating capital of $1 million for foreign IMTOs and an equivalent amount in naira for their domestic counterparts.

Nigeria's central financial regulatory body had previously issued international money transfer licenses to several fintech companies, such as Flutterwave, LemFi, PagaTech, VFD, and Interswitch, among others. The recently updated guidelines, however, do not explicitly state whether existing licenses will be revoked. The Central Bank of Nigeria (CBN) has introduced an annual renewal fee of N10 million for International Money Transfer Operator (IMTO) approval.

The Central Bank of Nigeria (CBN) has described the newly implemented regulations as a strategy to "liberalize the foreign exchange market and ensure transparency." In alignment with these adjustments, commercial banks are now authorized to act as agents for international money transfer services. Furthermore, through a separate circular, the CBN has removed the cap on foreign exchange transactions, granting International Money Transfer Operators (IMTOs) the ability to utilize the prevailing rate in the official market.

This week, the Central Bank of Nigeria (CBN) introduced fresh regulations aimed at enhancing liquidity in the country's unpredictable foreign exchange (FX) market and stimulating diaspora remittances as well as foreign capital inflows. In response to a significant decline in the official naira rate against the dollar, the CBN instructed banks to restrict their exposure to foreign exchange and offload surplus dollars.

Despite the devaluation in the preceding year and the implementation of a floating exchange rate for the Naira, the currency has encountered heightened volatility. This increased instability is linked to the Central Bank of Nigeria's (CBN) endeavors to tackle a backlog estimated to be in the range of $5 to $7 billion.

In a bid to instill confidence, the Central Bank of Nigeria (CBN) has been vocal about its initiatives to eliminate the existing backlog and has reiterated its commitment to clearing it early in the year. In a recent statement to Bloomberg, the CBN reassured that the backlogs would be resolved "within a short time," addressing the "fundamental issues that have hindered the effective operation of the Nigerian foreign-exchange markets."