In a groundbreaking move, the Central Bank of Nigeria (CBN) has announced a comprehensive ban on banks and financial technology companies (fintechs) participating in international money transfer services. The new guidelines, released on January 31, 2024, extend the ban to fintechs, broadening the scope of the 2014 restrictions that initially applied only to deposit money banks.
Under the revised guidelines, banks are now prohibited from directly conducting International Money Transfer services but can serve as agents. Simultaneously, fintech companies are barred from obtaining approval for IMTO, with the ban also encompassing individuals in bank management, shareholders, and officers. The regulatory stance emphasizes adherence to the provisions of the Banks and Other Financial Institutions Act (BOFIA) 2020, including restrictions on specific individuals in banks.
In a parallel move, the CBN has implemented a substantial increase in the application fee for an International Money Transfer Operator (IMTO) license. The fee has skyrocketed from N500,000 in 2014 to a remarkable N10 million, marking an increase of about 1,900% over the past decade. IMTOs seeking to operate in Nigeria are now required to submit various documents, including a non-refundable application fee, evidence of tax clearance, and incorporation documents.
Introducing a minimum operating capital requirement of $1 million for foreign IMTOs and an equivalent amount for local operators, the CBN has replaced the previous capital requirement of N2 billion for Nigerian companies and N50 million for foreign entities.
The regulatory reforms underscore the CBN’s commitment to stringent oversight and stability in the foreign exchange market. These measures aim to curb foreign currency speculation and hoarding among Nigerian banks, contributing to ongoing efforts to stabilize the naira and ensure economic stability. While fortifying the commitment to safeguarding the financial system, the bold reforms may introduce added complexity to remittance payments into Nigeria. The CBN signals a zero-tolerance approach to non-compliance, emphasizing immediate sanctions for defaulters. As stakeholders digest the implications, the financial landscape in Nigeria witnesses a transformative regulatory shift.
Credit: Nairametrics
