CBN Now Mandates Banks To Pay Naira To Beneficiaries For All Diaspora Remittances

The Central Bank of Nigeria (CBN) has issued a new directive to Deposit Money Banks (DMBs) and International Money Transfer Operators (IMTOs). The apex bank now wants all remittances from the diaspora paid in Naira, not the foreign currency they came in.

The bank says it is trying to control inflation by judiciously managing the foreign exchange market.

In plain terms, beneficiaries of remittances from the diaspora will now receive their monies in local currency – the Naira, based on the prevailing Nigerian Autonomous Foreign Exchange Market (NAFEM) rates.

The directive came in a circular signed by Dr. W. J. Him, acting director of the CBN’s Trade and Exchange Department, issued on June 24, 2024. It also directed the DMBs and IMTOs to match all future foreign currency inflows similarly.

The inflows come in, but the banks credit the customers in Naira. In return, the CBN is offering eligible IMTOs, which hitherto went through Authorised Dealer Banks (ADBs), direct access to Naira liquidity from the CBN in order to perform foreign exchange transactions.

The circular outlined a compliance protocol under which transactions with the central bank received before noon on trading days will be concluded on the same day.

The CBN also mandated daily returns from participating institutions to the apex bank, which contained information such as the source of funds, etc. 

Chasing Down Inflation

CBN governor, Mr Yemi Cardoso has repeatedly said he is trying to decelerate month-on-month inflation rates and has often expressed optimism that the monetary market will soon stabilize due to increased liquidity and the unified exchange rate system. 

But this new policy could stifle the thriving black market, where rates have tended to favor those with raw foreign exchange currency. While the CBN, through this policy, could improve the exchange rate, holding down inflation requires more than exchange rate controls; it also requires well-coordinated monetary and fiscal policies and discipline for economic stability.

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