CBN battles non-conformist diaspora remittance market

Despite efforts by the Central Bank of Nigeria (CBN) to stimulate activities in the formal channels of diaspora remittances, the window has continued to battle with its historical challenges, including rising competition with informal windows, poor regulatory compliance by the international money transfer operators (IMTOs), high charges and underhand dealing of agent banks.

Following the growing pressure on the naira last year, the apex bank retooled the regulatory framework with a focus on “improving remittance inflows into Nigeria”.

In a meeting with IMTOs and money deposit banks (MDBs), the CBN Governor, Godwin Emefiele, stressed: “Diaspora remittances through International Money Transfer Operators (IMTOs) shall henceforth receive such inflows in foreign currency through the designated bank of their choice.

“Such recipients of remittances may have the option of receiving these funds in foreign currency cash (U.S. dollars) or into their ordinary domiciliary accounts. These changes are necessary to deepen the foreign exchange market, provide more liquidity and create more transparency in the administration of Diaspora Remittances into Nigeria.”

Emefiele expressed the regulator’s frustration with IMTOs who he accused of profiteering from the arbitrage at the expense of encouraging the growth of the market. Their activities, he said, were driving more people to the informal channels.

Before the market would begin to assess the impact of the policy, the Central Bank at the weekend issued another circular, threatening of sanctioning IMTOs “who have continued to pay beneficiaries in naira”.

“Further to our circular titled ‘Receipt of Diaspora Remittances: Additional Operational Guidelines’, it has come to our notice that some IMTOs and unlicensed companies continue to facilitate diaspora remittances into the country in Naira, in clear contravention of the CBN directive that all remittances be paid to beneficiaries in dollars.

“For the avoidance of doubt, the CBN further clarifies as follows: Only licensed IMTOs are permitted to carry on the business of facilitating diaspora remittances into Nigeria; all diaspora remittances must be received by beneficiaries in foreign currency only (cash and /or transfers to domiciliary accounts or recipients); IMTOs are not permitted, under any circumstances, to disburse diaspora remittances in naira (either in cash or by electronic transfers), be it through remittance settlement accounts (which had been earlier directed to be closed), third party accounts or via any other payment platforms within and/or around the Nigerian financial system,’’ the Bank said in a circular issued on Friday.

Beyond dealing with uncooperative operators, the regulator is also faced with the irritation of getting others to admit that they need to register with the relevant local authorities to operate in Nigeria. Some months ago, for instance, it warned the public to stay off Azimo and Transfer Wise, overseas IMTOs, as they were not registered to participate in the Nigerian money transfer business.

It explained in a statement: “The attention of the CBN has been drawn to the activities of Messrs. Azimo and Messrs. Transfer Wise, both of which are purportedly transacting business, albeit unauthorised, as IMTOs. The bank wishes to notify the general public that neither Messrs. Azimo nor Messrs. Transfer Wise is licensed by the CBN to operate as an IMTO.”

Months after the CBN’s disclaimer, which also prompted some Nigerian banks to act in like manner, Azimo still lists Nigeria as one of its money transfer destinations, offering remitters fee-free service for the first two transfers. “Central Bank of Nigeria rules mean that payments can only arrive with recipients in USD. As soon as the situation changes, we’ll let you know by email. In the meantime, Azimo remains one of the safest and most reliable ways to send money to Nigeria,” information gleaned from the company’s website at the weekend said.

While the CBN goes after IMTOs, Prof. Ken Ife, an international finance expert, said the commercials banks, through which the recalcitrant international organisations operate, are as culpable as their partners. He noted that the IMTOs could not have flouted the rules without the active connivance of the local banks.

“The CBN has asked the commercial banks to close their (IMTOs’) naira accounts so that they can transfer dollars directly into their domiciliary accounts for payment to beneficiaries. If they continue to violate the regulations, then the commercial banks they work with are open to compliance actions. The CBN can fine the banks (sufficiently to deter them) or withdraw their licences,” he said.