The Central Bank of Nigeria (CBN) has banned banks and financial technology companies (fintechs) from international money transfer services.
This significant development is contained in the revised guidelines for the operations of IMTOs, which were officially released on January 31, 2024.
The document read:
- “All banks are prohibited from operating International Money Transfer services but can act as agents.
- “Also, Financial Technology Companies are not allowed to obtain approval for IMTO.
- “The provisions of BOFIA 2020 on the prohibition of employment of certain persons in banks shall also apply to IMTOS.”
The apex bank also excludes individuals from the management of banks, shareholders, and officers of a bank.
In the previous guidelines issued in 2014, only deposit money banks were prohibited. However, the CBN has extended the ban to fintechs.
N10 million application fee
The apex bank also increased the application fee for IMTO licence from N500,000 in 2014 to N10 million in the revised guidelines. This is an increase of about 1,900% in about 10 years.
The document noted that any IMTO intending to operate in Nigeria shall submit its application to the Director, Trade and Exchange Department with the following documents, among others:
“A non-refundable application fee of N10,000,000.00 (Ten Million Naira only) or such other amount that the Bank may specify from time to time; payable to the CBN through electronic transfer or bank draft.
“Approval to operate in other jurisdictions or agency agreement (for all IMTOs).
“Evidence of tax clearance and incorporation documents in Nigeria (for indigenous IMTOS) to include Memorandum and Articles of Association (Certified True Copy), of which the primary object clause shall indicate provision of money transfer services.”
There is also an annual renewal at a fee of N10 million Naira, or any amount that the apex bank may specify from time to time; payable to the CBN through electronic transfer or bank draft on or before 31st January of the year.
It was also noted that the renewal of IMTO approval shall be done within the first quarter of every year, adding that where an IMTO fails to avail its agent bank a copy of CBN renewal of its IMTO approval for that year within the first quarter of the year, the bank should cease any further transaction with the IMTO.
$1million share capital
The CBN also established a minimum operating capital requirement for International Money Transfer Operators (IMTOs) at $1 million for foreign entities and an equivalent amount for local IMTOs.
Previously, it was N2 billion for Nigerian companies and N50 million or its equivalent for foreign companies.
More Insights
- In its typical proactive and regulatory stance, the CBN underscores the critical importance of strict adherence to these guidelines. The apex bank sends a clear message that non-compliance will not be tolerated, with immediate sanctions set to be imposed on defaulters. This firm approach underlines the CBN’s commitment to robust regulatory oversight, a cornerstone of its mandate.
- This development coincides with an earlier circular from the CBN aimed at curbing what it perceives as rampant foreign currency speculation and hoarding among Nigerian banks. The nation’s financial watchdog has been growing concerned about these activities, which can significantly distort market dynamics.
- At the heart of the CBN’s sweeping reform is an effort to instil stability in the foreign exchange market. The naira, Nigeria’s currency, has been under considerable pressure, experiencing a marked depreciation.
- By reining banks and fintechs from international money transfer services, the CBN is strategically manoeuvring to fortify the currency and stabilise the forex market. This bold step reflects the CBN’s unwavering commitment to safeguarding the financial system and ensuring economic stability in Nigeria. However, it may add more complexity to remittance payments into the country.
