Why is the CBN rooting for the dollar in this way?
Aloy Chife who operates Sanaa Capital, an IMTO, says the CBN hopes to cut off arbitrage that happens when IMTOs cheaply convert dollars to naira before it gets to beneficiaries.
CBN says it wants users to receive “a market-reflective exchange rate for their inflows,” suggesting a willingness to float the naira.
Considering Nigeria’s large remittance market – $17.5 billion in diaspora remittances in 2019 according to the CBN – Chife believes this good move will level the playing field in the money transfer space.
He says the CBN has “recalibrated competition amongst the international money transfer organizations (IMTO). It’s now ground zero for all IMTO providers.”
Ensuring fairness in the market is probably a secondary goal for the CBN. The apex bank is on a long-term goal of setting up a structure that accounts for every dollar that enters the Nigerian financial system. As with most of the CBN’s projects, this structure will rest on the banking infrastructure.
Banks working with IMTOs will produce what the CBN calls a “central reporting portal for all foreign remittances
” that will
“improve visibility of foreign remittance flows.”
This portal, which will be managed by
the Nigerian Interbank Settlement System (NIBSS), is already being developed.
One can read this from a national security perspective, where the CBN is being vigilant about external funding of terrorism. The most obvious reason for cutting off mobile money operators and centering banks in the remittance process is to take advantage of the BVN which ties every bank account to an identity that can be verified.
But this MoMo exclusion raises one question; how financially inclusive is it to mandate people in rural areas to have bank accounts in order to receive money from their relatives abroad?
We don’t have the CBN’s response to this.
But this reminds us again that, regardless of MPesa’s prowess in Kenya or MFS Africa’s growing influence integrating cross-border transfers across 34 countries, Nigeria wants banks to take centre stage in shaping the future of Africa’s biggest economy’s financial system.