No more exchange rate cap for money transfer operators, says CBN

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CBN orders banks to sell excess dollars in 24 hours
CBN orders banks to sell excess dollars in 24 hours

The Central Bank of Nigeria (CBN) has removed the allowable limit of exchange rate quoted by the international money transfer operators (IMTOs).

CBN disclosed this on Wednesday, in a circular signed by Hassan Mahmud, director of trade and exchange department, and titled ‘Removal of Allowable Limit of Exchange Rate Quoted by the International Money Transfer Operators’.

IMTOs accept cash to transmit to persons resident in Nigeria or another country. They also carry out cross-border transfer services for personal purposes such as money transfer services towards family maintenance and money transfer services for foreign tourists visiting Nigeria.

To boost liquidity, the financial regulator said IMTOs are to quote exchange rates for naira payout to beneficiaries based on the prevailing market rates at the Nigerian foreign exchange market.

“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,” CBN said.

“However, in line with the CBN’s commitment to liberalise 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.

“For the avoidance of doubt, by this circular, the cap on allowable limit of -2.5% to +2.5% around the previous day’s closing rate of the Nigerian Foreign Exchange Market is hereby removed.

“Therefore, this circular supersedes the circular with reference TED/FEM/PUB/FPC/001/009 dated September 13, 2023.

“Authorised Dealers, International Money Transfer Operators and the General Public are hereby informed to note and comply accordingly.”

The latest regulation by the apex bank follows the new measures for financial institutions to manage foreign exchange (FX) risks, directing banks to sell dollars to prevent losses.

The new policy by the CBN aims to encourage transparency, and for operators to have a more competitive forex market and increase supply into the country.