CBN warns IMTOs of alleged forex arbitrage activities in Nigeria
By Sodiq Adelakun
The Central Bank of Nigeria (CBN) has recently taken a firm stance against International Money Transfer Operators (IMTOs), cautioning them against engaging in foreign exchange arbitrage within the country.
This move comes as the CBN aims to maintain stability in the Nigerian financial market.
In a circular signed by the Director of Trade and Exchange Department, Dr. W.J. Kanya, the CBN expressed its disapproval of arbitrary rate quotes that fall outside the permissible range, as they violate existing regulations.
The warning was prompted by recent violations and breaches by some IMTOs, which have exacerbated the foreign exchange crisis.
The CBN has outlined potential sanctions for further non-compliance by forex operators.
According to the CBN, operators are expected to sell forex at the approved rate, which is the Nigerian Autonomous Foreign Exchange Rate Fixing (NAFEX) rates plus or minus 2.5 per cent.
As of Wednesday, the NAFEX closed at N773.04/$1.
“However, during routine checks by the Central Bank of Nigeria, it was observed that some IMTOs were operating and acting in breach of the above-referenced circular. These actions included arbitrary rate quotes outside of permissible range and other sharp practices, violating extant regulations,” the circular partly reads.
On August 9, 2023, the CBN issued guidelines to the IMTOs and a circular enumerating terms and conditions, including payment mode, pricing, and rate quote, that must be complied with while providing International Money Transfer Services.
According to the new guideline, the spread on buying and selling by BDC operators shall be within an allowable limit of -2.5 percent to +2.5 percent of the Nigerian foreign exchange market window weighted average rate of the previous day.
The CBN said in the course of its routine checks it was observed that some IMTOs were operating and acting in breach of the circular.
The actions of the IMTOs included arbitrary rate quotes outside of permissible range and other sharp practices, in violation of extant regulations.
“For the avoidance of doubt, International Money Transfer Operators are required to quote rate within the allowable limit of 2.5 percent to +2.5 percent around the previous day’s closing rate of the Nigerian Foreign Exchange Market for their transactions.
“Going forward, any IMTO in breach of this specific regulation would face sanctions, including but not limited to being compelled to sell their proceeds to the Central Bank of Nigeria, suspension from operations and loss of operating license,” the circular reads.
