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CBN Unveils New Measures to Boost Naira Liquidity and Attract Diaspora Remittances

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CBN Act Amendment

The Central Bank of Nigeria (CBN) is taking a proactive step to address naira liquidity challenges and attract more diaspora remittances through formal channels. In a recent circular, the bank announced new measures that will grant eligible International Money Transfer Operators (IMTOs) direct access to naira liquidity through the CBN window or via Authorized Dealer Banks (ADBs).

This move signifies the CBN’s commitment to a more efficient and reliable foreign exchange market in Nigeria.

The CBN’s new policy offers a streamlined process for IMTOs. They can now directly access the CBN window or go through their designated ADBs to execute foreign exchange transactions in the market. Transactions completed before noon on a trading day will be settled on the same day, ensuring swift delivery of funds to beneficiaries.

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The pricing structure will be transparent, mirroring the rates established on the NAFEX (Nigeria Autonomous Foreign Exchange Market) platform. This ensures market-driven, fair value for the naira.

“Pricing on the CBN portal will mirror the NAFEX traded rates, which are based on an acceptable market benchmark,” the circular clarified.

Widening Access to Naira for Smoother Remittance Settlements

Previously, IMTOs faced limitations in accessing naira to settle remittance transactions. The new CBN policy aims to bridge this gap by providing them with wider access to local currency. This will allow for smoother and faster processing of remittances sent by Nigerians abroad to their families and loved ones back home.

“These measures are aimed at widening access to local currency liquidity for the timely settlement of diaspora remittances,” stated the circular signed by W. J. Kanya, Acting Director of the Trade and Exchange Department at the CBN.

Enhancing Transparency and Regulatory Oversight

The CBN has emphasized the importance of transparency and regulatory compliance in this new initiative. All participants, including IMTOs, ADBs, and the CBN, will be required to submit daily regulatory returns with detailed information on the sources of funds. This ensures a robust system that minimizes the risk of financial malpractice.

CBN’s Commitment to a Stronger Financial Ecosystem

The CBN’s recent actions demonstrate a multi-pronged approach to strengthening Nigeria’s financial ecosystem. The new measures for IMTOs build upon the earlier initiative from May 2024, where 14 IMTOs received approval-in-principle (AIP) to operate in the country. This move aimed to increase competition and innovation among remittance service providers, ultimately leading to lower transaction costs and improved financial inclusion for Nigerians.

“We are wasting no time driving progress to remove any bottlenecks hindering flows through formal channels permanently,” CBN Governor Olayemi Cardoso stated. “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.”

Expected Benefits

The CBN’s focus on attracting diaspora remittances is crucial for Nigeria’s economy. Remittances are a significant source of foreign exchange inflow, contributing to national development and poverty reduction. By facilitating a more efficient remittance system, the CBN expects to see a significant increase in formal remittance flows.

Read Also: Nigeria’s Forex Reserves Inch Up After Months of Decline

This, in turn, is expected to:

Improve Naira Liquidity: Increased foreign exchange inflows will boost naira liquidity, making it readily available for businesses and individuals.

Enhance Market Efficiency: A more transparent and competitive foreign exchange market will lead to efficient price discovery and a more stable naira exchange rate.

Promote Economic Growth: Increased foreign exchange reserves and a stable naira exchange rate can create a more favorable environment for foreign investment and economic growth.

If You Ask Me

The CBN’s new measures hold significant promise for the future of Nigerian remittances. By addressing longstanding challenges and fostering a more transparent and efficient market, the bank is creating an environment that can attract record levels of diaspora remittances. This, in turn, will contribute to economic growth, improved financial inclusion, and a more stable foreign exchange market for Nigeria.

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