In a move towards liberalizing and sanitizing Nigeria’s foreign exchange market, the Central Bank of Nigeria (CBN) has authorised International Money Transfer Operators (IMTOs) and other authorised dealers to quote exchange rates for naira payout to beneficiaries based on the prevailing market rates at the Nigerian foreign exchange market on a willing seller, willing buyer basis.
The CBN in a circular dated January 31, 2024, with reference number: TED/FEM/FPC/GEN/001/003 and addressed to all authorised dealers, IMTOS, and the general public stated that canceled the circular with reference TED/FEM/PUB/FPC/001/009 dated September 13, 2023, which states that International Money Transfer Operators are required to quote rates within an allowable limit of 2.5% to +2.5% around the previous day’s closing rate of the Nigerian Foreign Exchange Market.
The said in the circular that “For the avoidance of doubt, by this circular, the cap on the allowable limit of -2.5% to +2.5% around the previous day’s closing rate of the Nigerian Foreign Exchange Market is hereby removed. Therefore, this circular supersedes the circular with reference TED/FEM/PUB/FPC/001/009 dated September 13, 2023.”
The CBN’s removal of the allowable limit of exchange rate quoted by the International Money Transfer Operators means that a cap of +/-2.5% allowable denies Deposit Money Banks (DMBs) an opportunity to make excessive profit from foreign exchange transactions from IMTOs who have no option but to quote the prevailing rates through the banks while the banks warehouse these funds and sell at larger margins to willing buyers.
Gbolade Idakolo Managing Director, SD&D Capital Management Limited while reacting to the cap removal lauded the CBN’s continuous tightening of the noose on banks’ FX operations and speculators.
He said, “The removal of these restrictions will aid more FDIs and diaspora remittances to be channeled into the economy to combat the scarcity of US dollars being experienced presently which has led to serious devaluation of the Naira thereby increasing inflationary trend.
“This measure is long overdue after the foreign exchange liberalisation policy of government last year so that a level playing field which allows the forex market to regulate itself can be created and this would eventually lead to a reduction in scarcity of US dollars and the strengthening of the Naira.”
The circular signed by Dr. Hassan Mahmud Director, Trade & Exchange Department the CBN informed Authorized Dealers, International Money Transfer Operators, and the general public to note and comply accordingly.