Nigeria’s foreign exchange remittance flows require improvement, according to experts.

Experts have listed steps for Nigeria to boost foreign exchange remittances. One step is cutting transaction costs for the diaspora to encourage more money inward transfers. At a recent CBN roundtable during the World Bank/IMF Spring Meetings in Washington DC, stakeholders discussed other measures like tailored products for the diaspora and expanding remittance receiving options.

Key Measures for Improvement

Reducing Transaction Costs

During the discussions, the focus was on the significant obstacle posed by high transaction costs associated with remittances. Identified solutions revolved around reducing origination costs and encouraging competition within the remittance market. Additionally, regulatory reforms, including the potential removal of Nigeria from FATF, were proposed to address this issue.

Doubling Remittance Inflows via Formal Channels:

The objective is to enhance remittance inflows through formal channels. Strategies outlined to achieve this goal include diversifying remittance receipt methods, tailoring products to meet the specific needs of the diaspora, promoting innovative initiatives such as sandbox programs, improving data systems, ensuring price consistency, and facilitating direct selling by International Money Transfer Organizations (IMTOs) into the Nigeria Autonomous Foreign Exchange Market (NAFEM).

Establishment of IMTOs Stakeholders’ Forum:

A proposal was made for the creation of a dedicated forum to engage with IMTOs. The primary aim of this forum would be to educate and mobilize the diaspora community while fostering collaboration with regulators.

Compliance Standardization:

There was a strong emphasis on standardizing compliance processes to improve efficiency. The Central Bank of Nigeria (CBN) expressed its commitment to collaborating with regulators and relevant agencies to achieve this standardization and streamline remittance payment channels.

Stakeholders Involved

The discussion involved a range of domestic and international stakeholders in Nigeria’s forex market and remittance industry, including Lemfi, Flutterwave, J.P. Morgan, Remitly, VertoFx, Interswitch, BudPay, Makeba, TapTap Send, Visa, Venture Garden Group, and others.

Regulatory Framework Revision

• The CBN revised its regulatory framework for remittance companies in January 2024 to augment foreign exchange inflows.
• Revised guidelines include a minimum paid-up share capital of N2 billion for remittance companies and a minimum net worth of $1 million for IMTOs’ technical partners.

Significance

Nigeria’s annual remittance inflows are estimated at $20.5 billion by the World Bank, highlighting the importance of these measures in enhancing foreign exchange inflows.

By delving into the outlined measures and objectives in detail, it becomes evident that a concerted effort is being made to address the challenges hindering foreign exchange remittance flows into Nigeria and to create a more conducive environment for both diaspora and formal channels alike.