The Central Bank of Nigeria (CBN) on Tuesday directed Deposit Money Banks (DMBs) and International Money Transfer Operators (IMTOS) to pay all diaspora remittances in Naira and match with the corresponding foreign currency inflows going forward.
This was as the CBN Governor, Mr. Olayemi Cardoso, on Tuesday reaffirmed the determination of the Monetary Policy Committee (MPC) to subdue inflationary concerns through conventional methods.
The central bank disclosed its directive to all DMBs and IMTOS to pay all diaspora remittances in Naira in a circular dated June 24, 2024, that was signed by the CBN acting Director, Trade & Exchange Department, Dr. W. J. Him, which was addressed to all DMBs and IMTOS.
The apex bank noted that the move was part of CBN’s commitment to the smooth functioning of the foreign exchange markets and enabling greater remittance flows through formal channels.
Specifically, the central bank pointed out that it has implemented measures that would enable eligible IMTOs to access Naira liquidity through the apex bank.
Consequently, the CBN said henceforth, eligible IMTO operators would be able to access the CBN window directly or through their Authorised Dealer Banks (ADBs) to execute transactions for the sale of foreign exchange in the market.
To further smoothen the process, the circular among other things set out a compliance regime.
The CBN stated that the option of same day settlement would be available for transactions executed and confirmed before 12 noon on a trading date.
The circular also stated that pricing for transactions executed with the CBN would be based on prevailing Nigerian Autonomous Foreign Exchange Market (NAFEM) rates, as referenced by an observable and acceptable market benchmark.
It added that the operation of the market segment followed the existing arrangement in place for authorised dealers with foreign portfolio investment participating in the primary market securities auctions.
The central bank also stressed that regulatory returns to be submitted to it by all participants daily was mandatory and expected to contain all the relevant information on the sources of funds.
It stressed that all interested IMTOs were required to confirm their partner banks and advise standard settlement instructions to facilitate the smooth implementation of this initiative, adding that participants in this segment were limited to IMTOS, ADBs and the CBN.
Recently, Cardoso, disclosed that the apex bank had productive discussions with IMTOs, where, “we collectively committed to doubling remittance flows through formal channels into Nigeria in the immediate short to medium term.
“This target is both ambitious and achievable, and we’re wasting no time in setting up a collaborative task force, reporting to myself, to drive progress and address any bottlenecks that hinder flows through formal channels,” he had said.
The central bank had introduced several initiatives aimed at improving capital inflows into the country through diaspora sources.
In June 2023, the apex bank had also announced the introduction of its digital currency known as the eNaira as a payment option to recipients of diaspora remittance.
The central bank had said the move was in furtherance of efforts to liberalise the payout of diaspora remittance.
Meanwhile, Cardoso, on Tuesday reaffirmed the determination of the MPC to subdue inflationary concerns through conventional methods.
In an interview with Bloomberg in London, the CBN governor shared key insights on the current state of the market, mainly focusing on the stability of the Naira and inflation rates.
He noted a deceleration in the month-on-month inflation rates, which he termed a positive development.
Cardoso further assured that the MPC members remained vigilant in monitoring inflation trends and ensuring a moderation of inflation numbers.
He said, “MPC members will continue to monitor the trajectory and are determined to ensure that they put inflation under control.”
The central bank governor also expressed optimism about recent improvements in liquidity and return of confidence to the market, emphasising a period of stability following previous volatility in the foreign exchange market.
He attributed the new development to increased liquidity and a calmer approach from market participants on both the buy and sell sides.
He said, “In the past, people were panicking and front-loading their requests,” he explained, stressing that “Now, a lot of that has calmed down. There’s no inclination to do that because liquidity has returned to the market.”
He further pointed to the significant achievement of merging disparate exchange rates into a more unified system.
Cardoso said, “We had two different rates; right now, we more or less have one rate. And we believe that this is good. It allows companies to plan.”
He also emphasised the importance of a predictable exchange rate for economic planning and investment.
He reaffirmed his confidence in the current market dynamics, where willing buyers and sellers operate freely, noting that it had contributed to the stability of the Naira.
He, however, stressed the importance of continuous observation and management to ensure the market benefits all participants.
Cardoso, stressed the crucial role of coordinated monetary and fiscal policies in achieving economic stability, adding that the collaboration was essential for managing the macroeconomic fundamentals that influence the market, aiming to provide the best value for the Naira.
The country’s annual inflation rose to a 28-year high of 33.95 per cent in May 2024, according to data from the National Bureau of Statistics (NBS).
However, recent data revealed that the month-on-month inflation rate had slowed for the third consecutive month, validating the effectiveness of the apex bank’s monetary policy tightening measures.
The central bank has increased the Monetary Policy Rate (MPR), the benchmark interest rate for the third time in a row under Cardoso to curtail rising prices which have made life difficult for Nigerians in recent times.
The commitment will reconvene next month to review its policy options and way forward for the economy.
James Emejo in Abuja
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