Why Central Bank of Nigeria Asked Banks To Close Naira Accounts of Money Transfer Operators

Why Central Bank of Nigeria Asked Banks To Close Naira Accounts of Money Transfer Operators

In the last few hours, I have received questions on why the Central Bank of Nigeria (CBN) asked banks to close the naira accounts of money transfer operators (IMTOs, international money transfer operators) in Nigeria. As an investor in a new startup, M-Naira, which holds the trademark for mNaira , m-naira and similar, in Nigeria, and which just received licenses to run remittance in US and Canada, this is something of importance to me.

To some of our members at Tekedia, I have asked them to wait for our banking and finance experts like Azeez Lawal to return from the holidays to explain.

But from my understanding, this is what CBN is doing here: in the past, when you wired USD, Euro or any foreign currency from abroad to Nigeria, you were paid in Naira, determined by the CBN official exchange rate. The IMTOs maintained a special purpose naira account to work on that reconciliation between the USD, etc they had received, say in the US and UK. and the naira they have settled in Nigeria.

But under the new CBN policy, where the USD or Euro is paid in the same currency in Nigeria to the recipient, there is practically no need for IMTOs to run a naira account. In other words, they have been disintermediated in the system locally. What happens is this: it is now between CBN and IMTOs offshore offices, and CBN and local banks since one currency is involved. The IMTOs local naira accounts are now redundant and of no value.  (They can of course run the usual current and saving accounts).

This is a clear indication that CBN is committed to this policy: send the money in USD, and your recipient can pick it up in USD or have it deposited into a local USD domiciliary account. As I have noted, this is a good policy: you are essentially increasing the supply of USD in the nation and that would give naira a breathing space. 

The Central Bank of Nigeria has directed the Deposit Money Banks to close all naira accounts of International Money Transfer Operators. It disclosed this on Friday in a circular tilted ‘Receipt of diaspora remittances: Additional operational guidelines 2 addressed to all Deposit Money Banks, Payment Service Providers and International Money Transfer Operators. …

The circular read, “DMBs are to close all naira accounts for IMTOs. This is to ensure that diaspora remittances are received by beneficiaries in foreign currency only (cash and/or transfers to domiciliary accounts of recipients).

“DMBs are permitted to open new opex accounts for the purpose of the IMTO operations, such as salary payments and other operating expenses excluding diaspora remittance receipts.

“DMBs must ensure that proper audit of IMTO accounts is done to forestall further use of naira accounts for diaspora remittances purposes.”

And CBN wants to deal with the operators who continue to pay naira instead of the foreign currency: “However and regrettably, a few operators continue to pay remittances in local currency contrary to regulatory directive. The CBN frowns on this practice.” So, if you close their naira accounts, that “illegal” playbook becomes impossible.

The Central Bank of Nigeria (CBN) Had A Great Week On Policies


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19 thoughts on “Why Central Bank of Nigeria Asked Banks To Close Naira Accounts of Money Transfer Operators

  1. Won’t this policy also be beneficial to local businesses, especially digital start-ups who earn dollars too? Or is diaspora remittance the only inflow of dollars and euros to Nigeria?

    We just need to liberalize the entire thing, that would make dollars abundant here. When a lot of companies are capable of earning and holding sizable amount of dollars and can also effect international payments with it, all these acrobatics and gymnastics between naira and dollars will just disappear.

    We technically created and inflicted these injuries on ourselves, some folks decided to rig everything and magically made few creatures so rich, for doing essentially nothing!

    I expect the CBN to issue another update soon, we can make naira lovable and admirable again, once we stop scoring own goals.

    Nigeria is not bad, the only problem is that we have plenty bad actors all of over the place; naira will rise again.

    1. good day Mr Francis i really appriciate your point on this holl things, some individuals are only concer on their personer interest and forget we all are one Nigerian.
      how on earth did they think that this new improvement will better the nation Nigeria when those in government dont care for the well being of their citizens.

    1. Abiola Louis Duro-Emanuel · Edit

      How can it be good for Nigeria, it is stupid and ignorant policy, as it is with Nigeria when a few ppl are benefitting it becomes a good policy.
      You should all cover your faces in shame that a policy like this will grow your economy. Why don’t you send Naira from Lagos to Toronto,and collect it in Naira in Toronto, I guess Fela was right u all Sabi book but lack common sense.
      When I can collect Naira at a Bank or Western Union in Detroit then it is good policy.

    On the face of it, the CBN policy/directive for recepients of FX through IMTOs to receive their FX in cash or into their domiciliary accounts is fantastic. However, our problem: a low value, unstable and uncompetitive local currency, is not going to go away until we have put in place the right building blocks for a productive, competitive and value adding export oriented economy. Those building blocks are the right leadership; availability of constant electric power; good transportation system; and an effective educational system.
    Presently, before we get to instituting those fundamental building blocks, I would have to ask: why do we have to allow the existence of dom accounts in foreign currency in Nigeria? Why can we not all have only naira accounts in Nigeria and no dom. accounts as part of the tools for partially dealing with our problem? I say partially dealing with our problem because only when we have a productive, value adding export economy can we begin to permanently solve the problem at the base level.
    Regarding my no domiciliary account proposition in Nigeria, and please hear me out as I am sure a lot of people may already believe I have committed some form of Nigerian economic heresy: I was shocked, sometime in 2002/2003 when I first visited South Africa and sought to open a Non Resident Account in USD (like our Dom account back home in Nigeria); and was told that I could only maintain the account in Rands, the South African local currency. You bring in or transfer your dollars, whatever foreign currency that is acceptable by the South African banks, and the FX is immediately converted at the ruling rate to Rands and paid into your Rand account. When you want your money or you are exiting, it is again converted at the ruling rate to USD or whatever agreed FX and transferred according to your instructions.
    Under South African Reserve Bank laws, every adult Citizen or legal Resident of South Africa is entitled to the dollar equivalent of 1m Rands per annum for their international economic activity. For South African tax registered companies, the amount is the dollar equivalent of 10m Rands per annum. I am not sure what the rules are when a company’s requirements exceed the dollar equivalent of 10m Rands. By the way, the official Naira exchange rate to 1.00 Rand is ?26 and some odd figure as at Friday, 18 December 2020. So 1m Rands is equal to approximately ?26m; whilst 10m Rands is approximately ?260,000,000.
    I am not aware of a currency black market or vibrant currency black market in South Africa as you have it in Nigeria. Think of it, if citizens, legislators, executives, judges, business men, residents and foreigners in Nigeria all have to keep their accounts only in Naira, and get USD or FX at the official rate when required for legitimate purposes, who is going to get into the type of frenzied hoarding and speculation of FX that has pulverized the naira in the last couple of weeks or months.
    It is true that the consequences of COVID-19 and low oil prices has taken a devastating toll on the naira but hoarding and speculation have also taken their unjust share.
    I own a productive venture and do at least one container of imports every year but this year, it has been extremely difficult to get FX officially and prices at the FX black market have been out of this world. It is a lot of hoarding, speculation and arbitrage going on out there and I dare say that even the BDCs that are supposed to be part of the official market don’t sell at the official rates. Presently is there any BDC that Nigerians have ever gone to and were able to buy FX at the rate officially stipulated for BDCs?
    The only people really benefiting from our current situation are the BDCs themselves; currency black marketeers; unofficial and official arbitrageurs aka banks, and politicians.
    So why dont we do away with domiciliary accounts as presently constituted and try the South African model or a well thought out variant of the South African model. The CBN needs to end its sorrow, which is the nation’s tears, and find ways to get the political leadership of this country to commit to doing what needs to be done for a temporary solution to the instability of the Naira.
    Abel Rosnovski
    Ogudu, Lagos.

      1. On the South African state and every sensible society’s policy, it simply means no matter what, you can’t make them adjust to your own local system. Big things you mentioned here …..

    1. This is the perfect solution, the CBN and givt just need to have the balls to do it. If they sincerely want tonfix things people should only operate Naira Account in Nigeria, all forex should gondirect to CBN which will convert at official.rate and release Naira equivalent to owners.

      You cant walk intona bank in USA, China or South Africa to open a Naira account, why should we allow anyone to open a Cedi or Dollar account here?

    2. Wow Mr Abel Rosnovski you are legit in all your statement well summuried, the Nigerian constitution is based on self interest and not for the betterment of their fellow citizens,
      may God help Nigeria, Amen.

  3. With this new policy, it simply tells you that Nigeria abroad are the rightful owners of Nigerian economy.
    And if so, we in diaspora should get together and determine how Nigeria economy should run instead of these old , illiterate,scammers, bribers, money laundering pimps and whatever kind of people masquerading as the elitist?

    If you want our dollars, then we should have the ability to let these foolish decision makers how Nigeria should look like.



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