The Central Bank of Nigeria (CBN) has released a new circular eliminating the previous limit on exchange rates set by International Money Transfer Operators (IMTOs).
This action comes in response to a separate circular from the central bank that aimed to address concerns regarding potential instances of excessive foreign currency speculation and hoarding within Nigerian banks.
Dated September 13, 2023, the circular titled “Removal of Allowable Limit of Exchange Rate Quoted by the International Money Transfer Operators” signals a move towards a more liberalized foreign exchange system in Nigeria.
“The circular with reference TED/FEM/PUB/FPC/001/009 dated September 13, 2023 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.
However, in line with the CBN’s commitment to liberalize the Nigerian Foreign Exchange Market, IMTOs are hereby allowed 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.” CBN
These policies appear to be aimed at addressing Nigeria’s forex liquidity challenges and the resultant exchange rate depreciation which closed at N1,455/$1 on Wednesday, January 31, 2023.
Previously, IMTOs were required to quote rates within a permissible range of -2.5% to +2.5% around the previous day’s closing rate of the Nigerian Foreign Exchange Market.
This regulation was aimed at maintaining stability and consistency in exchange rates used for international money transfers.
However, the latest circular from the CBN indicates a policy change. IMTOs are now allowed to quote exchange rates for naira payouts to beneficiaries based on the prevailing market rates at the Nigerian Foreign Exchange Market.
This approach follows the principle of a “willing seller, willing buyer” basis, meaning that exchange rates will be determined by the market forces of supply and demand without a fixed cap.
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