In January 2024, Nigeria’s Central Bank unveiled the revised International Money Transfer Services Guidelines, marking a pivotal moment in the nation’s efforts to bolster transparency and efficiency in foreign exchange transactions, diaspora remittances, and cross-border fund transfers. This comprehensive overhaul, rooted in the Government’s commitment to fostering a conducive business environment, is poised to reshape the landscape of international money transfers while advancing prudential standards and compliance measures. Let’s delve into the key changes brought about by these revised guidelines and their implications for various stakeholders. The revised International Money Transfer Services Guidelines, a successor to the 2014 version, derive their authority from the Central Bank’s mandate under the Banks and Other Financial Institutions Act (BOFIA) 2022 and the Central Bank Act 2027.
Legal precedents, such as the Supreme Court’s ruling in OGBOJA VS ACCESS BANK PLC (2016) 2 NWLR (PT. 1496), affirm the regulatory authority of the Central Bank in shaping the financial landscape through regulations, guidelines, frameworks, or directives. The revised guidelines cast a wide net, affecting individuals, businesses, and financial institutions engaged in international money transfers. For instance, Gbenga, a resident of Canada sending money to his family in Lagos. Sending money to a Lagos-based professional receiving a salary from a UK-based company, are both subject to the guidelines’ provisions. However, facing challenges in paying his children’s UK school fees from Nigeria, falls outside the scope of the guidelines, which primarily focuses on inbound remittances and cross-border transactions.
Addressing cost and accessibility with key changes and innovations.
Despite these regulatory strides, concerns linger regarding the persistently high costs of remittances in Nigeria, as highlighted by the World Bank’s report in November 2021. The average remittance costs, estimated at 8% of the transferred sum, underscore the need for further interventions to enhance affordability and accessibility. While the revised guidelines encompass a broader spectrum of financial transactions, including diaspora remittances and cross-border investments, their direct impact on reducing remittance costs remains to be seen. The revised guidelines introduce several notable changes aimed at fortifying the integrity and efficiency of international money transfer services in Nigeria. These changes span entry requirements, licensing processes, compliance standards, agency relationships, and Consumer Protection measures.
Nigerian entities seeking international money transfer services licenses benefit from reduced licensing fees, thanks to the revised authorized capital threshold of US$1 million or its Naira equivalent. This adjustment in entry requirements aims to lower barriers to entry for domestic entities while ensuring financial Sustainability and regulatory compliance. Additionally, foreign companies wishing to operate in Nigeria must meet a minimum authorized share capital requirement of US$1 million, representing a significant increase from the previous ₦50 million threshold. This increase underscores the Central Bank’s commitment to attracting credible foreign Investors and enhancing oversight in the financial sector.
Permissible activities, consumer protection, and agency relationship.
Also, the guidelines introduce a phased licensing approach, comprising Approval-In-Principle (AIP) and Final Approval stages, streamlining the licensing process while ensuring regulatory oversight. By implementing this structured approach, the Central Bank aims to enhance efficiency, transparency, and accountability in the issuance of licenses to international money transfer operators (IMTOs). Moreover, IMTOs must adhere to renewal requirements and submit compliance reports, fostering accountability and transparency in operations. This regulatory framework promotes continuous monitoring and evaluation of IMTOs’ activities to mitigate risks and safeguard the integrity of the financial system. As well, the guidelines align with Nigeria’s enhanced anti-money laundering, combating Terrorism financing, and proliferation of weapons of mass destruction regimes, strengthening due diligence and reporting requirements. Recognizing the evolving nature of financial crimes, IMTOs are mandated to uphold rigorous compliance standards, with stringent measures in place to detect and report suspicious transactions promptly.
By integrating these regulations into the guidelines, the Central Bank seeks to enhance the resilience of Nigeria’s financial sector against illicit activities and promote trust among stakeholders. Only CBN-regulated deposit money banks and Fintech companies are also authorized to act as agents in international money transfer services, ensuring adherence to regulatory standards and consumer protection measures. This restriction aims to mitigate risks associated with unauthorized agents and enhance oversight in the delivery of financial services. Furthermore, the guidelines delineate the roles and responsibilities of agents, promoting transparency and accountability in their interactions with customers. By strengthening agency relationships, the Central Bank aims to enhance service delivery standards and mitigate operational risks in the international money transfer ecosystem.
Related Article: Regulating money transfer agencies in Nig.
IMTOs are empowered to facilitate remittances, cross-border payments, and fund transfers among individuals and businesses, fostering economic integration and financial inclusion. However, restrictions on outbound cross-border transactions aim to mitigate capital flight and ensure the stability of the foreign exchange market. These measures strike a balance between promoting Economic Growth and safeguarding macroeconomic stability, aligning with the Central Bank’s mandate to foster Sustainable Development and Financial Stability in Nigeria. Enhanced consumer protection measures, including expedited complaints resolution and greater disclosure rights, safeguard the interests of consumers and promote trust in the financial system. IMTOs are required to uphold stringent standards of service delivery, with penalties for non-compliance and breaches of consumer rights. By prioritizing consumer protection, the Central Bank aims to enhance confidence in international money transfer services and strengthen the resilience of Nigeria’s financial sector against emerging risks and challenges.