On January 31st, 2024, the Central Bank of Nigeria (CBN) unveiled a significant overhaul of its International Money Transfer Services (IMTS) guidelines. This revision, which effectively repeals the 2014 guidelines, aims to boost diaspora remittances and foreign capital inflows while fostering a more streamlined and regulated IMTS sector within the country. This write-up delves into the key provisions of the revised guidelines and analyses their potential impact on various stakeholders and the broader Nigerian financial landscape.
NOTABLE FEATURES OF THE CBN INTERNATIONAL MONEY TRANSFER SERVICES GUIDELINES
Licensing and Scrutiny: A Two-Step Process
The most significant change lies in the introduction of a two-tier licensing process. All prospective IMTOs (International Money Transfer Operators) must now obtain an Approval-in-Principle (AIP) followed by Final Approval from the Director, Trade and Exchange Department, Central Bank of Nigeria, Abuja after submission of the required documents as specified in the guidelines. This stricter vetting process, coupled with a non-refundable ten-million-naira (N10, 000, 000) application fee and a minimum share capital requirement of US$1 million for foreign IMTOs or the Naira equivalent for indigenous IMTOs, aims to ensure the financial stability and compliance of IMTOs. Additionally, the guidelines mandate annual license renewals with a hefty N10 million fee, emphasizing the CBN’s commitment to constant monitoring and adherence to regulations.
Shifting Sands: Banks Out, Fintech Companies Stay Out
The revised guidelines introduce a notable restriction, prohibiting all banks and financial technology companies from operating as IMTOs. However, banks are permitted to act as agents for licensed IMTOs, facilitating money transfer services through their existing infrastructure. This move could potentially benefit larger IMTOs by leveraging established bank networks for wider reach.
The Bank and Other Financial Institutions Act (BOFIA) 2020 which prohibits as well as the restricts employment of certain persons in banks also applies to IMTOs. This means that before any IMTO can appoint any director, chief executive, or management staff of such grade, such IMTO is to obtain the written approval of the CBN. On the partnership front, indigenous IMTOs seeking foreign technical partners require prior CBN approval. This measure should ensure the credibility and good record of partnering entities, as well as mitigate potential risks associated with foreign collaboration.
Outbound Restrictions and Reporting Requirements: Closing Loopholes
The revised guidelines emphasize robust reporting requirements. IMTOs must submit daily, weekly, and monthly returns to the CBN. Additionally, IMTOs are now obligated to report suspicious transactions to the Nigeria Financial Intelligence Unit (NFIU) within 24 hours. This enhanced transparency aims to combat money laundering and other financial crimes, bolstering the integrity of the Nigerian financial system.
Permissible and Non-Permissible Activities
The focus of IMTO activities shifts solely to inbound money transfers, targeting individuals through “person-to-person,” “business-to-person,” and “business-to-business” transactions. This restriction on outbound transactions represents a significant departure from the 2014 guidelines, potentially impacting the revenue streams of some IMTOs. Additionally, IMTOs are prohibited from engaging in any other business activities except those outlined in section 3.0 of the Guidelines, ensuring their focus remains solely on facilitating international money transfers.
Currency and Payment Mechanisms
The guidelines mandate all inbound money transfers to be paid in Naira only, through bank accounts or cash. This shift from allowing foreign currency payments aligns with the CBN’s broader efforts to promote the use of the Naira and strengthen domestic financial markets. Additionally, cash payments are restricted to amounts below $200, requiring proper identification for larger transactions.
Embracing Change: Implications for Stakeholders
The revised guidelines present both opportunities and challenges for various stakeholders. IMTOs will need to adapt to the new licensing process, focus on inbound services, and comply with the stricter regulations. While banks may be unable to directly operate as IMTOs, partnerships offer new avenues for collaboration and revenue generation. FinTech Companies, while excluded from directly providing IMTS, can still develop solutions and partner with licensed IMTOs. For beneficiaries, the naira-only payments might impact convenience for those that want to make dollar transactions.
CONCLUSION
The revised CBN guidelines introduce a new regulatory framework for IMTOs operating in Nigeria. While the stricter licensing process and activity restrictions may pose challenges for some players, the overall aim is to enhance the transparency, efficiency, and security of international money transfers. The focus on inbound transactions and Naira payments aligns with the CBN’s broader economic objectives. It could potentially attract larger foreign investments and boost the domestic financial sector. It remains to be seen how IMTOs would adapt to these changes and how effectively the new guidelines achieve their intended goal.
