Dollar Falls In Parallel Market To N1350/$, Official Rate At NAFEX Window Holds At N1,461

The market reacted positively on Thursday to the recent reforms by the Central Bank of Nigeria (CBN), with the Naira appreciating by 13.3 percent on the parallel market to close at N1,350 to the Dollar compared to N1,530/$ on Wednesday.

The strategy is to encourage people to approach the official FX market to carry out their transactions, a move which could be working after all as the official rate appears now more attractive to do business with where it is at the moment.

However, despite the latest CBN interventions aimed at market correction, the local currency again surpassed the parallel market price to close at N1,461.90/$ at the official Nigerian Autonomous Foreign Exchange (NAFEX).

This represented a marginal decline of N6.31 compared to N1,455.59/$ recorded the previous day.

This came as Deposit Money Banks (DMBs) have initiated steps to comply with the directive of the apex bank for swift repatriation of export proceeds into export domiciliary accounts.

The guidelines require that proceeds should be repatriated into an export proceeds domiciliary account maintained with the processing bank within 90 days of shipment with relevant fax or e-mail messages evidencing the receipt of the proceeds.

Also, on Thursday, the central bank issued revised guidelines on International Money Transfer Services (IMTO) in Nigeria, setting $1 million as minimum share capital for prospective operators as well as a non-refundable application fee of N10 million which is subject to annual renewal in like sum.

Contributing to the anticipated enhancement of FX supply, the official window recorded an increase in daily turnover of $156.86 million on Thursday from $134.07 million on Wednesday, indicating a 17.01 percent increase. The highest spot rate recorded on Thursday was N1,526/$1 while the lowest spot rate recorded was N891/$1.

However, under the new FX repatriation regime, banks are also required to certify the receipt of such proceeds to the central bank promptly.

However, in compliance with the directive, banks have sent out emails to their respective customers to provide relevant documents to facilitate timely transaction processing.

One of such correspondences urged all exporters to provide accurate details of their Export Proceed Domiciliary Account as well as NXP details.

It demanded that “NXP numbers should be provided to the buyer except in the case of an advance payment.

“Details of the receiver’s export domiciliary account should be accurately provided to the buyer for onward payment,” the document added.

Also, on the buyer’s requirement while effecting payment, the banks further requested that the “NXP number initially provided by the exporter must be quoted by the collecting bank at the point of payment.

“The exporter’s domiciliary account must also be quoted by the collecting bank at the point of payment,” the banks stressed.

Under the Repatriation of Export Proceeds (oil and non-oil) circular issued by the apex bank, proceeds of oil and non-oil exports are to be repatriated into the export proceeds domiciliary accounts of their respective exporters’ accounts within 90 days for oil exports and 180 days for non-oil exports.

Failing to do this,  the collecting bank will be liable to a fine of 10 percent of the FOB value of the transaction, including other appropriate penalties as provided in the BOFIA Act of 1991, as amended.

The CBN stated that where an exporter fails to repatriate the proceeds into the domiciliary account within the stipulated period, the exporter will be barred from participating in all the segments of the foreign exchange market in the country.

The central bank had insisted that shipping companies must ensure that the shipping documents carry the mandatory NXP number in compliance with federal government directive amid allegations of FX infractions perpetrated through shipping lines which often violate existing regulations meant to entrench transparency in the use of forex.

Meanwhile, under the revised framework for international money transfer services in the country, the CBN disclosed that any person or institution that renders the service without the express approval of the bank does so illegally.

The central bank disclosed this in a circular dated January 31 which was signed by CBN Director, Trade and Exchange Department, Dr. Hassan Mahmud and addressed to all authorised dealers, IMTOs, and general public.

The CBN, on September 26, 2014, issued the guidelines for international money transfer services in Nigeria which provided a framework for the licensing and operations of International Money Transfer Operators (IMTOS) in the country.

However, the revised template was necessitated by recent reforms to liberalise the foreign exchange market and ensure transparency in foreign exchange market transactions as well as boost diaspora remittances and other foreign capital inflows into the country, and promote efficient price discovery mechanisms and the evolution of appropriate market-determined exchange rate.

The new framework was also designed to enhance the ease of doing business for IMTOs in Nigeria and money transfer recipients.

Essentially, the guidelines seek to guide IMTOs in conducting money remittances in compliance with the regulatory framework established by the CBN.

The document encapsulates the requirements for obtaining approval from the CBN by promoters of IMTOS who intend to engage in the transmission of remittances to and from Nigeria while upholding the regulatory supervision of the CBN.

The document addresses critical aspects including organisational structure of an IMTO, principles of ownership and control, corporate governance standards, permissible and non-permissible activities.

The CBN also set the minimum share capital of $1 million for foreign IMTOs and the equivalent for indigenous IMTOS.

The bank stated that “No person or institution shall operate International Money Transfer Services unless such a person/institution has been duly approved by the CBN.

“Any financial product involving international money transfer by any institution or person that is not duly registered with the CBN is illegal,” the CBN noted.

Among other requirements, it said all IMTOs are further mandated to adopt policies stating their commitments to comply with Anti-Money Laundering (AML) Combating Financing of Terrorism (CFT) and Countering Proliferation Financing (CPF) of weapons of mass destruction obligations under subsisting laws, regulations, and regulatory directives and to actively prevent any transactions that otherwise facilitate criminal activities, Money Laundering, Terrorism Financing and Proliferation Financing (ML/TF/PF).

Under the regulation, all banks are prohibited from operating International Money Transfer services but can act as agents.

Also, financial technology companies (Fintechs) are not allowed to obtain approval for IMTO.

However, the permissible activities of IMTOs shall include inbound international money transfer transactions only, the CBN further noted, adding that the transactions shall be limited to the acceptance of monies for the purpose of transmitting them to persons resident in Nigeria.

James Emejo and Nume Ekeghe

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