Experts have outlined measures that must be taken by Nigeria to improve foreign exchange remittance flows into Nigeria.
One of the measures is to reduce the cost of transactions for the diaspora to encourage them to send more forex to Nigeria.
At a Central Bank of Nigeria (CBN) roundtable held during the World Bank/ International Monetary Fund (IMF) Spring Meetings in Washington DC on Wednesday, stakeholders tapped other measures to include: provision of products that suit the diaspora community, availability of more ways to receive remittances, among others.
The session was attended by domestic and international stakeholders in the Nigerian forex market such as Lemfi, Flutterwave, J.P. Morgan, Remitly, VertoFx, Interswitch, BudPay, Makeba, TapTap Send, Visa, Venture Garden Group, and other players in the remittances industry.
During the meeting, some of the objectives outlined by the Central Bank of Nigeria (CBN) include;
- Reducing transaction costs: A focal point of the discourse revolved around reducing transaction costs associated with remittances, which the CBN identified as a significant barrier to formal inflows. To reduce transaction costs, stakeholders identified the need to reduce the cost of origination for remittances. Additionally, there was a consensus on the importance of fostering competition within the remittance market to decrease costs. Participants also advocated for regulatory reforms, calling for Nigeria’s removal from the Financial Action Task Force (FATF).
- Doubling remittance inflows via formal channels: Another objective identified by the CBN is to double remittance inflows via formal channels. Participants stressed the need to offer more ways for people to receive their remittances, provide products that suit the needs of diaspora communities, encourage new ideas through sandbox programs, strengthen data systems, maintain consistent prices, and make it easier for international money transfer organization (IMTOs) to sell directly into NAFEM.
- Establishment of a stakeholders’ forum on IMTOs: In relation to this objective, stakeholders advocated for the establishment of a dedicated forum to engage with IMTOs. It was noted that this platform would aim to educate and mobilize the diasporan community while fostering collaboration with regulators.
- Compliance standardization: The importance of standardizing compliance processes was underscored, with the CBN expressing its commitment to collaboration with regulators and relevant agencies to streamline remittance payment channels, reduce friction and enhance efficiency.
What you should know
The World Bank estimates Nigeria’s remittance inflows at $20.5 billion annually. However, in a move to augment foreign exchange inflows, the CBN revised its regulatory framework for remittance companies in January 2024.
Part of the revised guidelines include: the minimum paid-up share capital of remittance companies at N2 billion, as well as a minimum net worth of $1 million for the technical partners of these IMTOs.
Recommended reading: FX remittances quadruple to $1.3 billion in February – CBN
