The Central Bank of Nigeria (CBN) has announced that only three companies are henceforth allowed to offer money transfer services to Nigeria. The three operators are Western Union, MoneyGram and Ria.
The decision was backed by a warning, issued on Tuesday, 2 August, which advises Nigerians at home and abroad to “beware of the unwholesome activities of some unlicensed International Money Transfer Operators [IMTOs].”
The sudden move has created immediate backlash because it affects a large volume of money. Remittances to Nigeria totalled about $20.7 billion in 2015, according to the World Bank.
The CBN says that the blocked IMTOs are adding to the dollar scarcity and, therefore, the sharp depreciation of the Naira, by not remitting needed foreign currencies to the financial system.
As most IMTOs are unlicensed to operate in the country, they did not have to comply with the CBN’s rule, requiring them to remit foreign currency to their respective agent banks in Nigeria for disbursement, in Naira, to the beneficiaries, an official of the CBN said.
As only three companies are allowed to transfer money into the country, the array of choices for those in the diaspora will be drastically reduced, and we can expect that even less will be received in remittances, say commentators. There is also the possibility of transfer fees for remittances to Nigeria shooting up due to the limited competition.
WorldRemit, an online money transfer service that launched in Nigeria in 2011, lamented that the move was arbitrary, inexplicable and hugely detrimental to the Nigerians abroad who rely on hundreds of money transfer companies and banks, to provide them with choice, convenience and competitive pricing. “Even now, as we suspend our service, there is no clarity on why this sudden change has happened. If it is on the basis of new rules, there was no warning. If it is a re-interpretation of old rules, local correspondent networks and banks should have been forewarned,” said Ismail Ahmed, WorldRemit Founder and CEO.
Ahmed said while Western Union used to control 78% of the transfers to Nigeria, now it controls less than 20%. Ahmed, whose company says it sends 40,000 money transfers to Nigeria each month and handles about $20 billion a year in remittances to countries worldwide, also laments the lack of clarity surrounding the change.
The Naira depreciated to a new low of N390 against the US dollar on the parallel market in the first August week, primarily due to a scarcity of foreign currency. How the new CBN policy will impact on the exchange rate will be seen in the coming days and weeks, say analysts. Meanwhile, in a bid to boost liquidity and stabilise the naira, the Central Bank of Nigeria has directed bank agents to the three approved International Money Transfer Operators, to sell foreign currency from inward money remittances to licensed bureau de change operators.
Sesan Adeola, Lagos