CBN Directs Banks to Pay Diaspora Remittances in Naira

New Directive for Banks and IMTOs

The Central Bank of Nigeria (CBN) has mandated Deposit Money Banks (DMBs) and International Money Transfer Operators (IMTOs) to pay all diaspora remittances in Naira. This directive requires the remittances to be matched with corresponding foreign currency inflows.

Official Communication

The directive was issued in a circular dated June 24, 2024, signed by the CBN Acting Director of the Trade & Exchange Department, Dr. W. J. Him. The circular was addressed to all DMBs and IMTOs.

Objectives of the Directive

The CBN emphasized that this move is part of its commitment to ensuring the smooth functioning of foreign exchange markets and increasing remittance flows through formal channels.

Measures for IMTOs

To support this initiative, the CBN has implemented measures that allow eligible IMTOs to access Naira liquidity through the central bank. Eligible IMTO operators can now access the CBN window directly or through their Authorized Dealer Banks (ADBs) for foreign exchange transactions.

Compliance and Settlement

The circular outlines a compliance regime, including the option for same-day settlement for transactions executed and confirmed before noon on a trading date. Pricing for transactions will be based on the prevailing Nigerian Autonomous Foreign Exchange Market (NAFEM) rates.

Regulatory Requirements

All participants must submit daily regulatory returns containing relevant information on the sources of funds. IMTOs are required to confirm their partner banks and provide standard settlement instructions to ensure smooth implementation. Participants in this segment are limited to IMTOs, ADBs, and the CBN.

CBN’s Commitment to Boost Remittance Flows

Recent Discussions

CBN Governor Mr. Olayemi Cardoso highlighted productive discussions with IMTOs, where a commitment was made to double remittance flows through formal channels into Nigeria in the short to medium term. A collaborative task force, reporting directly to the governor, has been established to drive progress and address any bottlenecks.

Past Initiatives

In June 2023, the CBN introduced the eNaira, a digital currency, as a payment option for recipients of diaspora remittance. This move was aimed at liberalizing the payout of diaspora remittances.

CBN’s Inflation Control Measures

MPC’s Stance on Inflation

Governor Cardoso reaffirmed the determination of the Monetary Policy Committee (MPC) to control inflation through conventional methods. In an interview with Bloomberg, he noted a positive development in the deceleration of month-on-month inflation rates and assured continued vigilance in monitoring inflation trends.

Market Stability and Liquidity

Cardoso expressed optimism about recent improvements in liquidity and the return of market confidence, emphasizing a period of stability following previous volatility in the foreign exchange market. He highlighted the achievement of merging disparate exchange rates into a more unified system, which allows for better economic planning and investment.

Economic Stability

The governor stressed the importance of coordinated monetary and fiscal policies in achieving economic stability. He pointed to recent data from the National Bureau of Statistics (NBS), which showed a slowdown in the month-on-month inflation rate for the third consecutive month, validating the effectiveness of the CBN’s monetary policy tightening measures.

Future Outlook

Continued Monitoring and Policy Review

The CBN has increased the Monetary Policy Rate (MPR) multiple times under Cardoso to curb rising prices. The MPC will reconvene next month to review its policy options and determine the way forward for the economy.