Weighing the Impact of CBN’s ‘Naira 4 Dollar’ as Regulator Adds 10 New IMTOs

The Central Bank of Nigeria has today added ten (10) newly approved international money transfer operators (IMTOs) to its earlier released list. This brings the number of authorised IMTOs to a total of 57.

Diaspora remittances into Nigeria constitute a significant source of external financing and can help drive economic growth by strengthening the foreign exchange (FOREX) rate.

Hence, it was not that much of a surprise when the Central Bank of Nigeria (CBN) introduced its “Naira 4 Dollar” scheme to incentivise foreign remittance inflows into the country. Launched in March, the initiative lets Nigerians receive N5 for every dollar sent in foreign remittances through formal banking channels.

The scheme had been set to run for just two months as the CBN stated the short-term policy would be in effect till May 8, 2021.

Since the scheme commenced, has there really been an improvement in FOREX inflows via remittances?

Remittance Inflows May have Increased

According to a Vanguard report, authorised forex dealers have estimated the weekly average inflow of remittances at $50 million since the CBN Naira 4 Dollar scheme commenced. This is a marked improvement of 150% compared to the $20 million average forex inflows recorded in the same period of 2019.

Spread out over a full year, this will see remittances through banks reach $2.6 billion, more than double the $1.1 billion posted in 2019.

While there is no specific data from the CBN to show that diaspora remittances have increased in the past month, the apex bank today added 10 IMTOs to its earlier released list. The first list had been released before the “Naira 4 Dollar” scheme was rolled out.

Coming after the scheme has been implemented, the addition of these new IMTOs might perhaps indicate that there has actually been a boost in foreign remittances and the CBN wants to keep leveraging that.

The newly approved IMTOs include Comet Trading Nigeria Limited, Paysend PLC, Swift Payment Limited and Wi-Pay Global LLC. However, prominent operators such as TransferWise and OFX remain out of the CBN’s list. Only three (3) of the added IMTOs are based in Nigeria.

Remittance inflows into Nigeria fell to $17.2 billion in 2020, a 27% decline year-on-year (YoY) from the $23.55 billion in 2019.

Moreover, the CBN recently ordered all banks and authorised FOREX dealers to accept both old series and lower denominations of US dollar bills from customers or face heavy sanctions. This is clearly part of its efforts to bolster foreign exchange circulation and might perhaps be aimed at complementing an increase in diaspora remittances.

May 8 Deadline Could be Extended

If the CBN is indeed witnessing a significant rise in foreign remittances into the country, then the regulator may extend its current May 8 deadline for the Naira 4 Dollar scheme.

After all, the regulator had said in March:

“The use of reimbursements of remittance fees has been critical in supporting improved inflow of remittances to countries in South Asia and in improving their balance of payments position following the COVID-19 pandemic.“

However, South Asian countries like Bangladesh – which gives recipients a 2% incentive on diaspora remittance, have been operating a similar policy for over a year, not just two months. So, it is likely that the Naira 4 Dollar scheme is extended.

On the whole, what the CBN has done with its string of remittance policies is to pave the way for traditional banks as the sole processors of forex inflows by ousting crypto exchanges, mobile money operators and payment service providers.