In January 2024, the Central Bank of Nigeria introduced the revised International Money Transfer Services Guidelines, signaling a significant step towards enhancing transparency and efficiency in foreign exchange transactions, diaspora remittances, and cross-border fund transfers. This overhaul, in line with the government’s Renewed Hope agenda, aims to revolutionize international money transfers while promoting prudential standards and compliance.
The revised guidelines, succeeding the 2014 version, derive 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 Central Bank’s regulatory authority in shaping the financial landscape through regulations, guidelines, frameworks, or directives.
The impact of these revised guidelines extends to individuals, businesses, and financial institutions engaged in international money transfers. For example, a resident of Canada sending money to family in Lagos or a Lagos-based professional receiving a salary from a UK-based company falls under the guidelines’ provisions. However, challenges faced in paying children’s UK school fees from Nigeria lie outside the guidelines’ scope, which primarily focuses on inbound remittances and cross-border transactions.
Addressing the persistent concerns about the high costs of remittances in Nigeria, the World Bank’s report in November 2021 highlighted the average remittance costs, estimated at 8% of the transferred sum. 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 key 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.
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.
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. IMTOs are mandated to uphold rigorous compliance standards, with stringent measures in place to detect and report suspicious transactions promptly.
Only CBN-regulated deposit money banks and fintech companies are 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.
Enhanced consumer protection measures, including expedited complaints resolution and greater disclosure rights, safeguard the interests of consumers and promote trust in the financial system. 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.
The revised International Money Transfer Services Guidelines represent a significant milestone in Nigeria’s efforts to modernize its financial system, promote transparency, and foster economic growth. As these guidelines take effect, stakeholders must adapt to the new regulatory landscape, ensuring compliance and contributing to a more efficient and secure financial ecosystem.
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