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In a significant move towards liberalizing Nigeria’s foreign exchange market, the Central Bank of Nigeria (CBN) has issued a circular removing the previous cap on exchange rates quoted by International Money Transfer Operators (IMTOs).
The circular, titled “Removal of Allowable Limit of Exchange Rate Quoted by the International Money Transfer Operators” and dated September 13, 2023, marks a departure from previous regulations aimed at curbing excessive foreign currency speculation and hoarding.
Under the previous guidelines, IMTOs were required to quote rates within a permissible range of -2.5% to +2.5% around the previous day’s closing rate of the Nigerian Foreign Exchange Market. However, the new directive allows IMTOs to quote exchange rates for naira payouts to beneficiaries based on prevailing market rates, operating on a “willing seller, willing buyer” basis.
This policy shift comes amidst Nigeria’s forex liquidity challenges and exchange rate depreciation, with the Naira closing at N1,455/$1 on Wednesday, January 31, 2023.
The decision to remove the exchange rate cap aims to foster a more transparent and market-driven foreign exchange regime, potentially leading to more competitive pricing for international money transfers. Additionally, the move is expected to incentivize IMTOs to bring their forex supply into Nigeria, thereby increasing forex inflow and liquidity.
The CBN’s decision reflects a broader commitment to a flexible and market-oriented approach to managing the country’s foreign exchange market, with implications for individuals and businesses engaged in international transactions.
