We’re back to the old: “The Central Bank of Nigeria (CBN) has rolled out new guidelines mandating that transfers made through international money transfer operators (IMTOs) will now be paid out exclusively in naira, a move believed to be geared toward mopping up dollars to increase FX liquidity.

“This directive, which is in line with regulations outlined in a circular dated January 31, 2024, affects major IMTOs such as Western Union, MoneyGram, Rapidtransfer, Ria, and other CBN-approved entities.”

Yet, CBN has offered something since the IMTOs now have the rights to set their own exchange rates, offering flexibility in the ecosystem.

We’re back to the old: “The Central Bank of Nigeria (CBN) has rolled out new guidelines mandating that transfers made through international money transfer operators (IMTOs) will now be paid out exclusively in naira, a move believed to be geared toward mopping up dollars to… pic.twitter.com/30Gwx019uT

— Ndubuisi Ekekwe (@ndekekwe) February 9, 2024

This new playbook will ensure Nigeria does not need to spend the USD it has (reduced USD Demand in Nigeria), even as it hopes to get more Supply of dollars internationally. This is Economics 101: you can improve price positioning by reducing Demand, even as you improve Supply. The challenge now is to convince the diasporas to send those dollars, euros and pounds for Naira in Nigeria. Good luck Nigeria as we continue the experimentation.

Nigeria’s Central Bank orders Money Transfer Operators (IMTOs) to pay out FX inflows only in naira

The Central Bank of Nigeria (CBN) has rolled out new guidelines mandating that transfers made through international money transfer operators (IMTOs) will now be paid out exclusively in naira, a move believed to be geared toward mopping up dollars to increase FX liquidity.

This directive, which is in line with regulations outlined in a circular dated January 31, 2024, affects major IMTOs such as Western Union, MoneyGram, Rapidtransfer, Ria, and other CBN-approved entities.

According to notices issued by several Nigerian banks to their customers, the new regulations stipulate that all inbound money transfers to Nigeria via the aforementioned IMTOs must be disbursed solely in naira, either through a bank account or in cash at the prevailing rate in the Nigerian Foreign Exchange Market (NAFEM).

“We would like to bring to your attention recent regulatory changes affecting international money transfers into Nigeria through Western Union, MoneyGram, Rapidtransfer, Ria, and other CBN approved IMTOS,” a notice from Ecobank reads.

“The Circular issued by the Central Bank of Nigeria (CBN) dated January 31, 2024, stipulates that ALL in-bound money transfers to Nigeria (via the above mentioned IMTOS) will be paid ONLY in Naira through a bank account or in cash at the prevailing rate in the Nigerian Foreign Exchange Market.”

However, there’s a caveat: only transfers below $200 can be paid out in cash, with amounts exceeding this threshold mandated to be credited to the recipient’s bank account.

“Transfers exceeding the Naira equivalent of $200 must be credited to the recipient’s bank account. Naira cash payment equivalent for amounts below $200 will require an acceptable means of identification,” information from Ecobank added.

This move by the CBN comes amidst recent denials from the apex bank that it plans to convert $30 billion in domiciliary accounts to naira. The CBN refuted these claims, labeling them as “false” and asserting that they aimed to incite panic in the foreign exchange market.

“This allegation is absolutely false and aims to trigger panic in the foreign exchange market, which the CBN is working assiduously to stabilize, as evidenced by its recent work and policy directions,” the apex bank noted in a press release.

This policy shift follows a series of other measures announced by the CBN, including restrictions on the operations of IMTOs to only inbound transfers, effectively halting outbound transfers. Additionally, banks and financial technology companies (fintechs) have been barred from offering international money transfer services.

While these measures are aimed at curbing foreign currency speculation and hoarding, concerns have been raised regarding their potential impact on Nigeria’s foreign exchange crisis. Analysts fear that mandating financial institutions to pay foreign currency remittances in naira could exacerbate the situation.

CBN Governor Yemi Cardoso sought to allay growing fears about the current FX market condition by stating that the foreign exchange market had seen a boost of over $1 billion in liquidity in recent days, attributing this to increased interest from foreign portfolio investors.

“We have already begun to see shifts in a positive direction. Indeed, we have already begun to see positive results with significant interest from foreign portfolio investors which was a concern that has already begun to supply the much-needed foreign exchange to the economy.

“For example, upward of the last few days. We have had over $1 billion that have come into the market. And this quite frankly is the answer to the question,” Cardoso said on Friday.

However, there are lingering concerns about the new directive’s potential to further restrict access to dollars, discouraging Nigerians in the diaspora from sending money home due to the forced conversion at official exchange rates, which are often lower than parallel market rates.

The government of Niger State is making strides toward curbing food inflation by considering the implementation of a price control law, with a bill for a Price Control Board passing its first reading in the state.

The bill, presented during a recent plenary session, marks a proactive step towards alleviating the economic burdens faced by Nigerians, particularly in light of the escalating food inflation plaguing the nation.

This initiative follows a recent ruling by a high court in Lagos, mandating the federal government to regulate the prices of essential goods and services nationwide within seven days.

Sponsored by ISA Etsugaie (APC-Agaie), the bill aims to tackle the pressing issue of rising food prices, exacerbated by external factors such as insecurity and climate change. Niger State currently grapples with a food inflation rate of 29.43% year-on-year, slightly lower than the national average of 33.93% as of December 2023, according to the National Bureau of Statistics.

Etsugaie outlined the objectives of the proposed Price Control Board, emphasizing its role in monitoring price fluctuations, analyzing them in relation to economic factors, and overseeing the distribution of essential goods. The board, if established, would maintain continuous surveillance over prices, interpret market movements, and correlate them with broader developments in the state’s economy.

Following its presentation during plenary, the bill was adopted by the House and passed through the first reading, signaling initial legislative support for the measure. However, concerns have emerged regarding the potential impact of price controls on local farmers, who already face challenges due to insecurity and economic instability.

Nigeria’s soaring 33.93% food inflation has prompted the federal government to declare a state of emergency on food security. Mohammed Idris, the minister of information, announced measures including the opening of National Food Reserves to stabilize prices. Additionally, human rights lawyer Femi Falana, SAN, has taken legal action against the government over rising food prices, culminating in the recent court order to regulate prices within seven days.

The move by Niger State comes shortly after Governor Mohammed Bago imposed a ban on wholesale food purchases by traders from neighboring states, attributing price hikes to the influx of external traders exacerbating scarcity. While intended to protect local markets, economists warn that price controls may worsen the situation, potentially driving farmers and vendors out of business.

In analyzing the implications of price controls, economists also caution against unintended consequences, including market distortions and reduced incentives for agricultural production. Price ceilings could lead to shortages and black market activity, undermining the objectives of ensuring affordability and accessibility of essential goods.

Moreover, the effectiveness of price controls in addressing root causes of inflation, such as the high cost of the food supply chain and economic instability, remains uncertain. Sustainable solutions may require comprehensive strategies addressing issues like inflation, agricultural investment, insecurity, and policy reforms to foster a conducive business environment.

Analysts said achieving sustainable economic growth and addressing inflationary pressures necessitates holistic approaches that address underlying structural challenges while mitigating short-term risks.

While the Price Control Board holds promise as a mechanism for price stabilization, its success will hinge on collaborative efforts with stakeholders across the agricultural value chain.

Niger State has been urged to pave the way towards a more resilient and equitable food economy by fostering a conducive environment for sustainable agricultural production and market access.