The Central Bank of Nigeria has warned operators against paying recipients of diaspora remittances in local currency despite the existing directive requiring them to pay in foreign currency, especially in US dollars.
The apex bank warned that violators of the order, which it issued on 3 December, could lose their operational licences if they failed to comply with its guidelines on remittances.
The CBN said this in a circular to International Money Transfer Operators and Payment Service Providers titled, ‘Receipt of diaspora remittances: Additional operational guidelines’ on Wednesday (16 December).
“All licensed institutions are required to comply with the foregoing guidelines as contraventions will attract stiff regulatory sanction including revocation of licence,” the circular stated.
The circular was signed by the director, trade and exchange department, and the director, payments system management department.
Part of the circular read, “Following the recent policy pronouncement on amendment to procedures for receipt of diaspora remittances, the CBN notes material compliance by majority of market participants as beneficiaries of remittances through IMTOs [International Money Transfer Operators] now receive foreign currency through their designated banks.
“However and regrettably, a few operators continue to pay remittances in local currency contrary to regulatory directive. The CBN frowns at this practice.”
Due to this, the CBN provided additional operational guidelines which are that “switches and processors should immediately cease all local currency transfers in respect of foreign remittances through IMTOs.”
It said, “All MMOs are required to immediately disable wallets from receipts of funds from IMTOs.
“Payment service providers are directed to cease integrating their systems with IMTOs going forward and must prevent comingling of remittances with other legitimate transactions
“All IMTOs are required to immediately disclose to beneficiaries that they exercise discretion to receive transfer in foreign currency cash or directly into their domiciliary accounts.”
The CBN said a central reporting portal for all foreign remittances to be managed by the Nigerian Interbank Settlement System was currently under development to improve visibility of foreign remittance flows.
The CBN said it remained committed to promoting transparency in the administration of diaspora remittances into Nigeria and would continue to enforce policies that would stabilise and deepen the Nigerian foreign exchange market.
The CBN adopted the new policy of requiring recipients of remittances to be paid in foreign currency after discovering that Nigeria was being short-changed by the international money transfer companies acting in collusion with their partners in Nigeria as the volume of money sent to Nigeria is not reflected in the amount received by Nigeria.
There have been rumours for several years that the banks and the IMTOs collude to keep money sent to Nigeria from reaching Nigeria through a dubious exchange scheme.