Economic analysts have praised the Central Bank of Nigeria for its recent decision allowing eligible International Money Transfer Operators (IMTOs) to directly sell foreign exchange on the Nigerian Autonomous Foreign Exchange Market (NAFEM).
The experts believe this decision will enhance foreign exchange inflows in the long term by improving market efficiency and transparency, and by offering more competitive rates through official channels. They view this development as a positive stride towards aligning Nigeria’s forex market with global standards, potentially fostering a more stable and robust forex environment beneficial to the overall economy.
However, they caution that close monitoring by the CBN and relevant authorities during the implementation phase is crucial to swiftly address any challenges and ensure the policy achieves its intended objectives without unintended consequences.
The central bank recently mandated Deposit Money Banks (DMBs) and IMTOs to convert all diaspora remittances into Naira and match them with corresponding foreign currency inflows going forward.
Under the new directive, eligible IMTOs will gain direct access to Naira liquidity through the CBN’s window or via their Authorized Dealer Banks (ADBs), enabling them to conduct foreign exchange transactions in the market.
“This move is expected to bolster forex supply,” remarked economic policy analyst Stephen Kanabe, noting it could help stabilize exchange rates by narrowing the gap between official and parallel market rates.
Kanabe highlighted that direct IMTO sales may streamline forex transactions, leading to increased transparency and efficiency in the forex market. “This could inspire confidence among senders and recipients, encouraging more to utilize official channels for transactions.”
Many believe the policy change could incentivize Nigerians abroad to remit funds through official channels, given the prospect of more competitive exchange rates. This could potentially boost remittance inflows, a critical source of forex for Nigeria.
Hassan Oaikhenan, Professor of Economics at the University of Benin, noted that increased forex supply through official channels might reduce demand in the parallel market, potentially lowering its rates. “While generally positive, this could make the parallel market less attractive, impacting users who rely on it.”
Industry observers view this shift as a significant move towards enhancing remittance flows into the country and expanding access to local currency liquidity for recipients converting remittances into Naira.
However, experts anticipate some exchange rate volatility during the transition period as market participants adjust to the new system, which could temporarily discourage forex inflows.
