On Tuesday, August 2, the Central Bank of Nigeria (CBN) issued a statement warning Nigerians to steer clear of what it called “unlicensed International Money Transfer Operators (IMTO)” in the country. This would have passed off as another document put out by the country’s apex bank which would only arouse the interest of financial institutions or economic policy experts. But this one had something in it for everyone- and some people think it’s rather unsavory.
In Nigeria, international money transfer is dominated by a few operators; but in the past few years, new players have come in to have a slice of the market. In 2015, Nigerians in the diaspora sent home a staggering total of about $21 billion- far more than the amount received by any other country in sub-Saharan Africa. Now, some claim that the Central Bank’s requirements for IMTOs to operate in Nigeria might just be restrictive enough to threaten the flow of remittances.
The statement by the CBN referring to the unlicensed IMTOs was, in fact, a confirmation of the CBN’s move to implement its minimum requirements for companies offering international mobile money transfer services to Nigeria. The requirements, which were contained in a 2015 memorandum, include having a minimum net worth of $1 billion and being licensed in 20 countries with an operational experience of at least 10 years. This shuts out all but a few of the existing international money transfer operators, the unaffected companies being Western Union, MoneyGram, and Ria.
One of the not-so-lucky operators, WorldRemit, has reacted by labeling the policy “arbitrary, inexplicable and hugely detrimental to the Nigerian diaspora” which, it says “rely on hundreds of money transfer companies and banks, providing them with choice, convenience and competitive pricing”. Its CEO, Ismail Ahmed, said the policy “reverses the progress made so far by the country”.
However, the Central Bank certainly doesn’t see it as “detrimental”. In fact, its press release says the policy was designed “for the greater economic good of Nigeria”, and that it was a demonstration of the apex bank’s unwillingness to condone “any attempt aimed at undermining the country’s foreign exchange regime”. This allusion to Nigeria’s FOREX related troubles suggests that the restriction is part of its efforts to halt the slide in the value of the naira. Nevertheless, the same argument against other currency exchange restrictions is being presented against this one: that it stifles economic activity.
The CBN has in recent months leaned towards liberalizing the FOREX market; it now appears that further losses in the value of the naira may have informed the decision to wield its restrictive stick again. Although the link between the IMTOs and a volatile FOREX market may not come to the mind of the lay person as a reason for the CBN’s action, it does look like a plausible reason- at least, for the advocate of restrictive government policy. Perhaps it is the view of the Central Bank that keeping tabs on numerous players in the international money transfer business is best done by simply reducing the number of players they have to keep tabs on. Then it will be able to monitor the compliance of IMTOs to its rules on transactions involving the exchange of local and foreign currency.
Whatever the motive of the CBN, the net effect of its policy will be the best yardstick to judge its suitability for Nigeria’s financial system and the economy in general. And for this, Nigerians will have to wait.
The CBN’s 2015 memorandum detailing its requirements for IMTOs can be found here: