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By Chinwendu Obienyi with agency reports
Licensed currency traders say the recent appreciation of the naira and relative stability in Nigeria’s foreign exchange market are being driven by a structural shift in remittance flows, with International Money Transfer Operators (IMTOs) increasingly channeling diaspora funds through official avenues.
IMTOs are companies approved by the Central Bank of Nigeria (CBN) to facilitate transfers from Nigerians abroad to beneficiaries at home.
For years, some IMTOs diverted part of their inflows through unofficial channels, including fintech platforms and unlicensed online operators, which offered higher rates than the official market.
This practice widened the gap between official and parallel exchange rates, sometimes by as much as N50–N100, fueling speculative activity and hoarding.
Hence, traders say that those arbitrage opportunities are largely gone. Speaking to a news medium, the President, Association of Bureau De Change Operators of Nigeria (ABCON), Aminu Gwadabe, stated that those days of significant margin between the official and parallel markets have drastically reduced.
According to him, “In some cases, the parallel market is even trading below the official rate. Speculative activity has really reduced because there is no profit to be made.”
He added that the narrowing arbitrage has been underpinned by the increased flow of remittances through official channels.
IMTOs, approved by the CBN to facilitate transfers from Nigerians abroad, now bring in roughly $600 million per month, with a target of $1 billion monthly from 2026. This represents a marked improvement from earlier years when only a fraction of remitted funds entered official markets.
The Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, Taiwo Oyedele had disclosed that just 10 per cent of the $20 billion remitted in 2023 reached the CBN’s reserves.
Similarly, the World Bank reported Nigeria received about $21 billion in diaspora remittances in 2023 through official channels, nearly four times the country’s foreign direct investment for the year.
Whilst noting that the current uptick in onshore remittance flows is crucial for closing the gap between official and parallel rates, Gwadabe said, “The reason IMTOs diverted funds in the past was clear: the parallel market paid more. That advantage is gone. It has really helped stabilize the market, making it easier for households and businesses to plan for obligations such as school fees.”
However, a bureau de change operator, Abu Ardo, revealed some IMTOs still quietly divert portions of their inflows. “While the trend is positive, certain operators find ways to channel dollars through parallel routes when rates are higher,” he said.
Nevertheless, traders and analysts agree that broader supply factors, stronger oil inflows, rising diaspora remittances, renewed foreign investor confidence, and tighter CBN oversight, have contributed to market stability.
“Speculators are more cautious because the CBN is cracking down on hoarding, giving the naira breathing space,” Ardo added.
Market watchers note that while the naira’s recent stability is encouraging, it remains fragile. Sustained gains will depend on consistent remittance inflows, disciplined supply management, and ongoing central bank intervention.
The narrowing of FX arbitrage, combined with remittances increasingly flowing through official channels, is emerging as a key factor in reducing volatility and creating more predictable conditions for both businesses and households.
