The Central Bank of Nigeria (CBN) has issued a new circular that removes the previous cap on exchange rates quoted by International Money Transfer Operators (IMTOs).
This follows a circular issued by the central bank addressing suspected cases of excessive foreign currency speculation and hoarding from Nigerian banks.
The circular titled Removal of Allowable Limit of Exchange Rate Quoted by the International Money Transfer Operators dated September 13, 2023, marks a shift towards a more liberalized foreign exchange regime in Nigeria.
- “The circular with reference TED/FEM/PUB/FPC/001/009 dated September 13, 2023 states that International Money Transfer Operators are required to quote rates within an allowable limit of -2.5% to +2.5% around the previous day’s closing rate of the Nigerian Foreign Exchange Market.
- However, in line with the CBN’s commitment to liberalize the Nigerian Foreign Exchange Market, IMTOs are hereby allowed to quote exchange rates for naira payout to beneficiaries based on the prevailing market rates at the Nigerian Foreign Exchange Market on a willing seller, willing buyer basis.” CBN
These policies appear to be aimed at addressing Nigeria’s forex liquidity challenges and the resultant exchange rate depreciation which closed at N1,455/$1 on Wednesday, January 31, 2023.
Why the change?
Previously, 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.
- This regulation was aimed at maintaining stability and consistency in exchange rates used for international money transfers.
- However, the latest circular from the CBN indicates a policy change. IMTOs are now allowed to quote exchange rates for naira payouts to beneficiaries based on the prevailing market rates at the Nigerian Foreign Exchange Market.
- This approach follows the principle of a “willing seller, willing buyer” basis, meaning that exchange rates will be determined by the market forces of supply and demand without a fixed cap.
What this means
The removal of the -2.5% to +2.5% cap represents a significant step by the CBN towards liberalizing the foreign exchange market in Nigeria.
- This move is expected to encourage more transparent and market-driven exchange rates, potentially leading to more competitive pricing for customers engaging in international money transfers.
- Sources familiar with the policy informed Nairametrics that the recent changes aim to encourage International Money Transfer Operators (IMTOs) to bring their foreign exchange (forex) supply into Nigeria, rather than keeping it abroad.
- Previously, due to exchange rate limits, diaspora Nigerians using IMTOs to send money home couldn’t sell forex at market rates, leading to reduced forex liquidity in Nigeria.
- Now, with the removal of these limits, the apex bank believes IMTOs can trade forex at prevailing market rates, including rates similar to the black market, thereby increasing forex inflow into Nigeria.
This development is likely to have implications for the foreign exchange market in Nigeria, affecting both individuals and businesses engaged in international transactions.
The CBN’s decision reflects the CBN’s move towards a more flexible and market-oriented foreign exchange environment, which they believe could contribute to the overall health and efficiency of Nigeria’s financial sector.
Circular on allowable limit of exchange rate quote_240131_211923
This is a very poor reporting.
The writer was repeating one thing over and over, again and again.
It’s meant to affect individuals and marketers? The effects is it positive? Will this reduce the current exchange rate issues and help Nigerians have more goods at a cheaper rate?
Instead of importing toothpicks and about everything else, actually make ‘goods’ in Nigeria and you can have them as cheap as you want.
This could lead to the balance of Nigeria Forex liquidity
This will gradually close the difference between CBN rate and the black market rate. And it make more Nigerians to exchange their dollars here in Nigeria, rather than through a third party fintech abroad.
It is a good move. Thanks to CBN
Let’s pray it should work for betterment on the country
All this policies will not work if we are not producing anything in this country we need to attract local production.
Encourage local entrepreneurs kick out all forms of employment frustrators like agbero. And engage them with other jobs that will llead to exportation of local produce goods.
Well the statement is sweet but economically the issue is addressed
This is not all about Dollar and naira exchange rates is about the Nigerian government to take a right approach to overhaul the nation economy by
Bring the manufacturing company up and boost the power sector to enable us produce our goods locally made and export, position Nigeria health, education sector up and forget foreign goods, education abroad. Etc should be stop and focus on our own and lastly must we except the western world economy or leadership ideology? All they have been giving us is not working. We should stop listen to them.
Let’s see how it goes
The should allow Nigerians access to Dollar and international transaction using ATM card and see the way dollar price will fall because there is no rush on aboki.. imagine u want to buy a book on Amazon.. u rush to abiko to aquire dollar.. abiko will increase the price.. if the do this… Demand for dollar will reduce and when the seller have no much buyers… The split the price so as to make saes and feed there families
All these nonsense are not the problem, even producing locally is also not the problem. In the 80s and 70s, Nigeria doesn’t produce almost anything, yet Naira and dollar were equivalent, sometime naira will even be higher than dollar.
The problem started with the stupid fraudulent policy Buhari started by pegging Naira at whatever rate they want. Who will see naira at N800 in bank rate and at N1500 at aboki and choose to change through Bank.
That policy was implemented to favor a few elites, who will get dollar from bank at a cheap rate and change it through aboki at a higer rate. APC is a fraudulent party. Simple.
All these are not the problem, even producing locally is also not the problem. In the 80s and 70s, Nigeria doesn’t produce almost anything, yet Naira and dollar were equivalent, sometimes naira will even be higher than dollar.
The problem started with the policy made by Buhari by pegging Naira at whatever rate they want. Who will see naira at N800 in bank rate and at N1500 at aboki and choose to change through Bank. A lot of dollars still comes into Nigeria through people in diaspora, but they end up in hand to hand, not through the bank.
That policy was implemented to favor a few elites, who will get dollar from bank at a cheap rate and change it through aboki at a higer rate. We will nevee get it right till we have flexible exchange policy.
It is primarily a matter of demand and supply case. The major problem causing the pull is the artificial scarcity which had been deliberately incorporated into the financial system and the illegality within the third party exchange rate agents, black markets agents in connival with banks made it tough to have a rational exchange rate. The devaluation of naira will continue if that black markets and financial banks are not put to check. There are other secondary reasons for the devaluation of naira such as low productive capacity, poor infrastructure and bad leadership.