The Central Bank of Nigeria (CBN) has reported a notable 39% increase in inflows through International Money Transfer Operators (IMTOs) for the first quarter of 2024 compared to the same period in 2023.
This surge is attributed to recent reforms implemented by the CBN aimed at attracting more dollar supply through IMTOs. The boost in remittance inflows is seen as a crucial development for Nigeria, particularly as the country grapples with declining foreign exchange (FX) inflows due to reduced oil output and revenue generation.
According to the quarterly statistical bulletin of the CBN, the increase in inflows has been substantial. In January 2024, inflows stood at $383.04 million, marking a significant rise of 30% from $295.21 million in January 2023. This upward trend continued in February, with inflows reaching $322.83 million, representing a dramatic 65% increase from $195.23 million in February 2023. March 2024 saw inflows of $363.70 million, reflecting a 30% rise from the $279.79 million recorded in March of the previous year.
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The total inflow for the first quarter of 2024 amounted to $1.07 billion, marking a 39% increase from the $770.23 million recorded in the same period of 2023. When comparing Q1 2024 to the last quarter of 2023, which saw total inflows of $965.82 million, there is an increase of about 11%.
Impact of CBN Reforms
In January 2024, the CBN issued a circular that removed the previous cap on exchange rates quoted by IMTOs. Before the circular, 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. By the end of January, the CBN further released revised guidelines for the operations of IMTOs, which included several significant changes.
The application fee for an IMTO license was increased from N500,000 in 2014 to N10 million in the revised guidelines, an increase of about 1,900% in about 10 years. The CBN also established a minimum operating capital requirement of $1 million for foreign entities and an equivalent amount for local IMTOs.
Additionally, IMTOs were previously barred from purchasing foreign exchange from the domestic market to fulfill their obligations, but this ban has been lifted with the recent circular, allowing IMTOs to trade on the official market.
The CBN also reached an agreement with IMTOs to set up a Collaborative Task Force to double remittance inflows into the country. This task force reports directly to Yemi Cardoso, the Governor of the CBN. Additionally, the CBN recently granted 14 new Approval-in-Principle (AIP) to IMTOs, according to the Bank’s Acting Director of Corporate Communications, Mrs. Hakama Sidi Ali.
The Central Bank’s reforms have included streamlining processes, onboarding more IMTOs, and enhancing measures to ensure an increase in the supply of foreign currencies. These measures are believed to be paying off, as evidenced by the substantial increase in remittance inflows.
This surge in remittance inflows is crucial for Nigeria’s economy, providing much-needed foreign exchange and supporting household income. The increase in dollar supply through IMTOs not only helps stabilize the naira but also supports various economic activities dependent on foreign exchange.
The CBN has been counting on diaspora remittances to boost FX inflow, which has been on the decline due to reduced oil output. With the decline in oil revenues, remittances have become increasingly vital in maintaining Nigeria’s foreign exchange reserves and overall economic health.
The recent reforms and efforts to attract more inflows through IMTOs are part of the CBN’s broader strategy to mitigate the impact of reduced oil revenues and ensure a steady supply of foreign currency.
This trend is expected to continue, contributing positively to the nation’s economic outlook and helping to stabilize the FX market amid declining oil revenues.