As part of renewed efforts to deepen diaspora remittances and enhance transparency in Nigeria’s foreign exchange (FX), market, the Central Bank of Nigeria (CBN), has issued a directive mandating all International Money Transfer Operators (IMTOs), to open and operate naira settlement accounts with authorised dealer banks (ADBs).
This directive, contained in a circular signed by Musa Nakorji, forms part of a broader policy framework aimed at improving traceability of remittance flows, strengthening regulatory compliance, and boosting efficiency within Nigeria’s FX ecosystem.
The policy will take effect from May 1, 2026, reinforcing the CBN’s push to formalise remittance inflows—one of the country’s most critical sources of foreign exchange.
Core Policy Directive
According to the CBN circular:
“As part of measures to enhance diaspora remittances, strengthen transparency, traceability, and effective monitoring of all transactions… all IMTOs are hereby directed to open Naira settlement accounts and ensure that all transactions are routed strictly through their designated settlement accounts.”
Key provisions include:
- All IMTOs must open naira settlement accounts with any authorised dealer bank of their choice.
- IMTOs may designate existing accounts or open new ones, and can operate multiple accounts across different banks based on business needs.
- All transactions related to international money transfers—including disbursements and settlements—must be processed exclusively through these accounts.
This effectively centralises remittance operations within Nigeria’s formal banking system, ensuring that all inflows are properly captured and monitored.
Operational Framework and Compliance Requirements
The directive introduces stricter operational and reporting standards for IMTOs and ADBs:
- Restricted Account Funding:
Settlement accounts shall only be credited with:- Remittance inflows
- Proceeds of foreign exchange conversions
- Mandatory Reporting:
IMTOs must submit a list of their designated settlement accounts to the CBN and update it regularly. - Regulatory Compliance:
All accounts must be operated in line with existing anti-money laundering (AML), and counter-terrorism financing (CFT), regulations. - Transaction Routing:
Every stage of the remittance value chain—from inflow to final payout—must pass through the designated accounts.
These measures are designed to improve oversight, reduce leakages, and enhance accountability in the remittance ecosystem.
Transition to Naira-Based Disbursement
A major implication of the policy is the mandatory conversion of remittances into naira before disbursement:
- Beneficiaries in Nigeria will no longer receive foreign currency payouts (e.g., US dollars).
- All remittance proceeds will be paid in naira, based on prevailing market rates.
This marks a significant shift from previous frameworks that allowed recipients to receive funds in foreign currency, and aligns with the CBN’s objective of strengthening local currency utilization.
Supporting Measures to Enhance Market Efficiency
In addition to the settlement account requirement, the CBN introduced complementary reforms to improve FX market operations:
a. Real-Time Pricing Mechanism
IMTOs are required to reference the Bloomberg BMatch platform for pricing:
- Ensures market-reflective exchange rates
- Improves price discovery
- Reduces information asymmetry between IMTOs and banks
- Encourages participation in the official FX market
b. Enhanced FX Liquidity Distribution
Authorised dealer banks are permitted to:
- Process foreign currency transfers from IMTO settlement accounts to other banks
- Supply FX to approved market participants, including licensed Bureau de Change (BDC), operators
This is expected to improve liquidity circulation and reduce fragmentation in the FX market.
Policy Objectives
The directive is part of a broader strategy to:
a. Strengthen FX Liquidity
By channeling remittances through official banking channels, the CBN aims to:
- Increase FX supply in the formal market
- Stabilise the naira
- Reduce reliance on speculative and informal sources
b. Enhance Transparency and Traceability
Centralised settlement accounts enable:
- Better monitoring of inflows
- Reduced risk of illicit financial flows
- Improved regulatory oversight
c. Formalise Remittance Inflows
The policy seeks to:
- Curb diversion of funds into the parallel market
- Encourage the use of regulated financial channels
d. Boost Diaspora Confidence
A transparent and efficient system is expected to:
- Attract more remittances from Nigerians abroad
- Strengthen trust in the financial system
Economic Significance of Remittances
Diaspora remittances remain a vital pillar of Nigeria’s economy, contributing to:
- Household income and poverty alleviation
- Foreign exchange reserves
- Balance of payments stability
By formalising and optimising these inflows, the CBN aims to unlock their full macroeconomic potential.
Implications for Stakeholders
a. IMTOs
- Must upgrade systems to comply with new routing and reporting requirements
- Face stricter oversight and operational controls
b. Authorised Dealer Banks
- Play a more central role in remittance processing
- Benefit from increased FX inflows and transaction volumes
c. Remittance Recipients
- Will receive funds exclusively in naira
- May benefit from improved transparency, though with reduced currency flexibility
d. FX Market
- Likely to experience improved liquidity and reduced volatility
- Greater alignment between official and market-driven exchange rates
Potential Challenges
Despite its advantages, the policy may face:
- Exchange Rate Concerns: A wide gap between official and parallel market rates could discourage formal remittance channels.
- Adjustment Costs: IMTOs may incur short-term operational and compliance costs.
- Public Resistance: Some recipients may initially resist the shift away from foreign currency payouts.
Conclusion
The CBN’s mandate requiring naira settlement accounts for IMTOs represents a comprehensive reform of Nigeria’s remittance framework. By combining stricter operational rules with market-based pricing and enhanced transparency measures, the policy aims to strengthen remittance inflows and stabilise the FX market.
If effectively implemented, this directive could significantly improve Nigeria’s ability to harness diaspora remittances as a sustainable and reliable source of foreign exchange, while reinforcing confidence in the country’s financial system.