The Central Bank of Nigeria (CBN) on Friday insisted payments of all diaspora remittances to beneficiaries must be in dollars and other foreign currencies and not Naira.
In its official circular to all authorized dealers and international money transfer operators (IMTOs) signed by the CBN Director of Trade and Exchange Department, OS Nnaji, the CBN warned of dire consequences against the continued contravention of its directives by operators.
The CBN warned that any individuals and/or institutions found to be aiding, abetting or directly contravening these guidelines and paying beneficiaries of diaspora remittances in local currencies would face stiff sanctions.
The sanctions include withdrawal of operating licenses, closure of culprit’s accounts in Nigerian banks, including barring them from accessing banking services in Nigeria.
The CBN said it would not hesitate to authorize the closure of the accounts of any unlicensed operators in Nigerian banks, including barring them from accessing banking services in Nigeria. if found to be contravening these directives.
In the circular titled: “Modalities for Payout of Diaspora Remittances”, the CBN made reference to a previous circular on additional guidelines it issued on the receipt of Diaspora remittances by beneficiaries.
The apex bank said in contravention of its directive that all remittances to beneficiaries be paid in dollars or foreign currencies, some IMTOs and unlicensed operators have continued to facilitate diaspora remittances into the country in Naira.
The CBN clarified that apart from the point that only licensed IMTOs are permitted to facilitate diaspora remittances into Nigeria, all diaspora remittances must be received by beneficiaries in foreign currency only, either in cash and/or transfers to domiciliary accounts of the recipients.
“IMTOs are not permitted under any circumstances to disburse diaspora remittances in Naira (either in cash or by electronic transfers) be it through Naira remittance settlement account (which had been earlier directed to be closed), third party accounts, or via any other payment platforms within an/or around the Nigerian financial system,” the CBN said.
Reiterating the objective behind the regulation, the CBN said these measures are intended to promote transparency, grow diaspora remittances and significantly improve foreign exchange inflows into the country.
On December 3, 2020, the CBN Governor, Godwin Emefiele, gave clarification on the new policy measures in the country’s remittance programme, saying it was designed to boost and facilitate an efficient flow of remittances sent home by Nigerians in the Diaspora.
He said the changes were as a result of the Bank’s internal review of the operations of IMTOs in the country and the potential impact improved flows from abroad could have on the country’s economy.
Estimated annual remittance inflow from Nigerians in the Diaspora is put at about $24billion, which could significantly help in improving the country’s balance of payment position, reduce its dependence on external borrowing and mitigate the impact of COVID-19 on foreign exchange inflows into the country.
The CBN governor recalled the promulgation of the first remittance programme law in 1996, which exempted remittances from taxes.
He said the private arrangement, with limited involvement of the CBN was between an IMTO, Western Union and First Bank of Nigeria, the only Western Union agent.
At the initial stage, Mr Emefiele said Western Union was dealing with only First Bank directly, while First Bank, in turn, had other banks as sub-agents.
He said the programme enabled recipients of remittances to receive such funds over the counter in foreign currency, amongst other options till the launch of the latest programme, which allowed other money transfer organizations to provide services to Nigerians in the Diaspora interested in remitting funds back to Nigeria.
However, due to problems of dollar cash availability, some of the remittance operators working with the commercial banks decided to remit funds to recipients in local currency, at an agreed exchange rate between the banks and the IMTOs.
In 2016, the CBN, determined to increase remittance inflows and improve the number of formal channels Nigerians in the Diaspora could remit funds, launched a licensing regime for new IMTOs, resulting in the licensing 65 new Operators.
The CBN governor said due to a lot of illegalities perpetrated by the operators involving the Naira/dollar exchange rate, there was a significant drop in foreign flows into the country.
On November 30, 2020, the CBN announced a new policy initiative, which amended the procedures for receipt of Diaspora remittances into Nigeria, including that beneficiaries of Diaspora Remittances through IMTOs shall henceforth receive such inflows in foreign currency (US Dollars) through the designated bank of their choice.
Since the introduction of the policy, the CBN said there have been some pushback by some of the IMTOs who are resisting the new policies.
The latest threat of sanctions by the CBN is to trying to enforce compliance and ensure that the policy was derailed.