The Central Bank of Nigeria (CBN) has suddenly changed its policy towards International Money Transfer Operators (IMTOs), effectively blocking many channels through which Nigerians send and receive money. The apex bank issued very little warning before it enforced this policy across the country. In a press release on Tuesday, the CBN advised Nigerians at home and abroad to “beware of the unwholesome activities of some unlicensed International Money Transfer Operators.” The bank affirmed that this action was in the sovereign interest of the country, stating that it will “not condone any attempt aimed at undermining the country’s foreign exchange regime.”
The new policy means that the licenses of all but three operators have been rescinded. The three operators are Western Union, MoneyGram and Ria. All these companies have physical operations on the ground in Nigeria. The Central Bank opines that the blocked IMTOs are adding to the dollar scarcity and, therefore, the sharp depreciation of the Naira, by not remitting needed foreign currencies to the financial system. As most IMTOs are unlicensed to operate in the country, they did not have to comply with the CBN’s circular last month, requiring them to to remit foreign currency to their respective agent banks in Nigeria for disbursement, in Naira, to the beneficiaries.
Inevitably, this decision will have a substantial impact on Nigerian lives. A Nigerian abroad, who is thinking about sending money back home, may not, if he finds it stressful to find a transfer operator. As only three companies are allowed to transfer money into the country, the array of choices for those in the diaspora will be drastically reduced, and we can expect that even less will be received in remittances. Nigeria receives an estimated $20 billion in remittances yearly, and this income could be at risk as a result. While the CBN is right to look for new modes to prevent the further depreciation of the currency, the method it used in blocking the transfer operators leaves a lot to be desired.
WorldRemit, an online money transfer service that launched in Nigeria in 2011, lamented that the move was arbitrary, inexplicable and hugely detrimental to the Nigerians abroad who rely on hundreds of money transfer companies and banks, to provide them with choice, convenience and competitive pricing. “Even now, as we suspend our service, there is no clarity on why this sudden change has happened. If it is on the basis of new rules, there was no warning. If it is a re-interpretation of old rules, local correspondent networks and banks should have been forewarned,” said Ismail Ahmed, WorldRemit Founder and CEO. “On Monday evening, Nigeria simply shut down transfers. The banks told us they couldn’t process our transfers. The country was one of the most competitive markets until Monday,” he added.
The abrupt nature of the decision could potentially be more damaging than the decision in the long run. The punitive fine levied on MTN last year, as the telecoms giant failed to register its unsubscribed users, raised questions amongst investors about the government’s attitude towards foreign firms. The sudden nature of this policy will raise alarms for investors who are considering operations in the country. The Naira has now depreciated to a new low of N390 against the US Dollar on the parallel market, primarily driven by a scarcity of foreign currency. Thus, the country is in need of hard currency and cannot afford to engage in such business-averse policy implementation methods.
