Revised IMTOs’ rules and rationale

The need to enthrone a regime of exchange rate stability and encourage full participation of all critical stakeholders in the foreign exchange market, have emerged as the major reason behind the revised rule for the International Money Transfer Operators (IMTOs).

By the rule, authorized dealers who are agents of the International Money Transfer Operators (IMTOs) were directed to sell foreign currencies accruing from the remittances to licensed Bureau De Change (BDCs) operators.

But before this, IMTOs are required to remit the foreign currency to their agent banks, while in return, banks will disburse the value in Naira to the beneficiaries, according to the prevailing exchange rates. The directive was to take immediate effect.

It must be recalled that since June 20, the peg on the Naira was lifted and exchange rates now are determined market forces- demand and supply, which currently is above N316 per dollar.

Besides, this process of remittances and disbursements in Naira to beneficiaries and foreign currencies to BDCs must be strictly followed, in compliance to the provisions of the Anti-Money Laundering Laws, as well as the established Know-Your-Customer rules, with Bank Verification Number inclusive. This is where the challenges started.

Before now, these provisions involve an agreed periodic returns rendition (a list of purchases and sales) daily, weekly and monthly, to the Central Bank of Nigeria (CBN) by major stakeholders- banks and BDCs, even the IMTOs. Unfortunately, some were circumventing the agreements to the detriment of the economy.

The new rule, while restating the need for compliance the laid down rules, raised the bar in the eligibility criteria, as a foil to a situation where operators play without commitment.

Certainly, it did not go down well with some IMTOs, which were shortchanging the country with their “underhand” dealings, as CBN tightens noose on banks, where the collaborations seemed to be flourishing. For now, withdrawal of dealership licence and other sanctions are at stake for violators and the regulator said it is ready to implement the law to the letter.

Recently, CBN in a circular, warned Nigerians at home and in the Diaspora to beware of the unwholesome activities of some unlicensed IMTOs in the country, whose modes of operations are detrimental to the Nigerian economy.

“All financial service providers in Nigeria, just as in other jurisdictions, are required to be duly licensed in order to protect both customers and the financial system as well as to ensure the credibility of financial transactions.

“For the avoidance of doubt, all licensed International Money Transfer Operators, in line with the CBN Circular on the sale of foreign currency proceeds of July 22, 2016, are required to remit foreign currency to their respective agent banks in Nigeria for disbursement in Naira to the beneficiaries while the foreign currency proceeds are to be sold to Bureaux De Change operators, for onward retail to end users.

“The Central Bank of Nigeria will therefore, not condone any attempt aimed at undermining the country’s foreign exchange regime. Accordingly, members of the public are advised to beware of the activities of such unregistered IMTOs for the greater economic good of Nigeria,” a statement signed by the Acting Director of Communications Department, CBN, Isaac Okorafor, said.

Specifically, only three companies- MoneyGram, Western Union and RIA have scaled through the guidelines’ prescriptions.
For a regulatory source who pleaded anonymity, “the move is a foil to “quite corruption and racketeering” among the operators. “It may not stop it entirely or immediately, but it is certain that what is in place now is making a serious headway in this racketeering game between banks and IMTOs.”

Reacting to the development, Okorafor, said the huge number of Diaspora remittances, estimated in excess of $25 billion do not all get into the economy because of racketeering by the IMTOs.

The new guide for IMTOs, he said, directed that all such remittances be channeled into banks and paid in naira according to market rates, since the exchange rate is no longer pegged.

Of course, there is no excuse on the basis that remittances paid by the local currencies are shortchanged, unless one plans to do round-tripping with the inflows, either by banks and/or IMTOs.

For the BDC operators, the new window is more like a “second chance”, which they must judiciously use to justify their claims of helping to ensure official-parallel rates convergence, as well as come out clean of the alleged rent seeking. The content of the renditions now and its timeliness must bear thorough witness to their claims.

By the new arrangement, the remittances sold to BDCs are to take care of travellers’ allowances and act as a shock absorber to the foreign exchange reserves.

The new arrangements therefore, may have burst the rent seeking deals between the operators and banks, as those who were operating freely.

It is shocking to learn that two-third of the remittances bandied around do not enter Nigeria and some parts of the number that did are not fully declared.

This means that illegal currency speculations have gained strong interest in the country and in a situation of the dwindling foreign earnings by government, the local currency will only continue to be in the heat.

“Some of the illegal flows are suffocating the naira, because the dollars are first turned to naira and in return, the dollars are chased with the same naira by the same people,” the source said.

But the CBN spokesman said that CBN “did not stop the licence of any money transfer operator in Nigeria. All we have done is to ensure that money transfers are done transparently, legally and for the benefit of the country’s economy.”