CBN Removes Cap on Exchange Rates for International Money Transfer Operators

 

CBN Removes Cap on Exchange Rates for International Money Transfer Operators

The Central Bank of Nigeria (CBN) has introduced a new circular, dated September 13, 2023, removing the previous cap on exchange rates quoted by International Money Transfer Operators (IMTOs). The circular, titled "Removal of Allowable Limit of Exchange Rate Quoted by the International Money Transfer Operators," reflects a shift towards a more liberalized foreign exchange regime in Nigeria.

Previously, IMTOs were 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. However, the latest circular allows IMTOs to quote exchange rates for naira payouts to beneficiaries based on the prevailing market rates at the Nigerian Foreign Exchange Market on a "willing seller, willing buyer" basis.

The removal of the -2.5% to +2.5% cap is a significant step towards liberalizing the foreign exchange market in Nigeria. This move is expected to promote more transparent and market-driven exchange rates, fostering competitive pricing for customers engaged in international money transfers.

Sources indicate that the policy change aims to encourage IMTOs to bring their forex supply into Nigeria, rather than keeping it abroad. With the removal of limits, diaspora Nigerians using IMTOs can now sell forex at prevailing market rates, potentially increasing forex liquidity in Nigeria.

This development is likely to have implications for the foreign exchange market, impacting individuals and businesses involved in international transactions. The CBN's decision reflects a move towards a more flexible and market-oriented foreign exchange environment, contributing to the overall health and efficiency of Nigeria's financial sector.