New Naira Settlement Policy for Diaspora Remittances
The Central Bank of Nigeria (CBN) has introduced a new policy that significantly alters the way diaspora remittances are processed in the country. This move represents a major shift from traditional practices, where such transfers were typically made in foreign currencies like the US dollar. The new rule mandates that all international money transfer operators (IMTOs) must establish naira settlement accounts and channel all remittance inflows through these accounts. Starting from May 1, recipients will only receive funds in the local currency, effectively ending the practice of receiving payments in dollars.
This policy is aimed at deepening the flow of remittances while enhancing transparency, traceability, and regulatory oversight within the foreign exchange market. For years, remittances have been a crucial source of foreign exchange for Nigeria, supporting household incomes and contributing to the country’s external reserves. However, concerns have long existed about how quickly these inflows leave the domestic economy, limiting their broader impact.
By requiring naira settlements, the CBN aims to retain more value within the system and improve monitoring of foreign exchange movements. Musa Nakorji, the Director of the Trade and Exchange Department at the CBN, emphasized the compulsory nature of the directive. “All IMTOs are hereby directed to open naira settlement accounts and ensure that all transactions are routed strictly through their designated settlement accounts, maintained with authorised dealer banks in Nigeria,” he stated.
The bank clarified that every transaction linked to international money transfers must be processed exclusively through these designated accounts. Operators can either designate existing accounts or create new ones, and they may maintain multiple settlement accounts across different authorised dealer banks. These accounts are restricted in scope and can only receive remittance inflows and proceeds from foreign exchange conversions conducted by licensed IMTOs or their agents through authorised participants in the Nigerian Foreign Exchange Market.
To ensure compliance and enhance regulatory visibility, IMTOs are required to notify the central bank’s trade and exchange department of all designated settlement accounts and provide updates whenever changes occur. The directive also extends to how foreign exchange is managed within the system. Authorised dealer banks are permitted to process foreign currency transfers from IMTO settlement accounts to other approved participants, including bureau de change operators. This provision is expected to improve liquidity and efficiency in the foreign exchange market.
On pricing, the central bank has introduced a benchmark mechanism to guide operators. IMTOs are instructed to align their rates with real-time market prices available on Bloomberg’s BMatch platform. This approach is intended to enhance price discovery, reduce information asymmetry, and encourage greater participation in the official foreign exchange market. By aligning rates more closely with market realities, the policy seeks to curb distortions that have historically driven transactions into informal channels.
In addition to operational directives, the apex bank reiterated the importance of strict compliance with anti-money laundering, combating the financing of terrorism, and counter-proliferation financing requirements. Operators are expected to maintain comprehensive records to support audits and regulatory reviews, reinforcing the integrity of the financial system.
Cross-Border Payment Reforms
The remittance policy forms part of a broader effort to modernise Nigeria’s cross-border payment ecosystem and align it with global best practices. For emerging economies like Nigeria, improving the efficiency of international payments is seen as critical to fostering economic inclusion and supporting trade. Policymakers have increasingly recognised that seamless cross-border transactions can unlock opportunities for households and businesses, particularly micro, small, and medium enterprises that rely on international markets.
CBN Governor Olayemi Cardoso underscored the importance of reforming digital payment systems during the G-24 Technical Group Meetings held in Abuja. He noted that efficient payment infrastructure is essential for inclusive growth, yet several structural challenges continue to limit participation. Among these challenges are high remittance costs, delays in settlement, fragmented payment systems, and the heavy compliance requirements that often discourage smaller players from engaging in global trade.
Reforms within Nigeria’s financial system are therefore aimed at addressing these constraints and creating a more seamless payment environment that serves all stakeholders. By leveraging digital technologies and improving regulatory frameworks, the country hopes to enhance the speed, affordability, and accessibility of cross-border transactions. However, the governor also cautioned that digital payments come with inherent risks, including the possibility of currency substitution, weakened monetary policy transmission, increased volatility in foreign exchange markets, pressures on capital flows, and fragmentation in regulatory oversight.
Global Financial Standards
Nigeria’s recent removal from the Financial Action Task Force grey list represents a significant milestone in its financial reform journey. The grey list identifies countries with deficiencies in combating money laundering and terrorist financing, and removal signals improved compliance with international standards. Reacting to the development, Cardoso described it as a validation of ongoing reforms. “The FATF’s decision to remove Nigeria from the grey list is a strong affirmation of our reform trajectory and the growing integrity of our financial system.”
The decision is expected to enhance Nigeria’s standing in global financial markets by boosting investor confidence and potentially lowering the cost of capital. It also underscores the country’s commitment to tackling illicit financial flows and strengthening regulatory oversight. Nigeria’s exit from the grey list follows similar progress by other African countries, including South Africa, Mozambique, and Burkina Faso. By addressing identified weaknesses, these nations have improved their compliance with global standards and strengthened their financial systems.
Financial Technology and Economic Transformation
Beyond regulatory reforms, Nigeria’s financial landscape is undergoing rapid transformation driven by the growth of financial technology. Over the past decade, the country has evolved into one of Africa’s most dynamic fintech ecosystems, attracting investment and fostering innovation. Cardoso highlighted the transformative potential of digital finance, noting its ability to expand access to financial services, create employment, and improve livelihoods.
Nigeria’s position as a leading fintech hub is reflected in investment trends. In 2024, startups in the country attracted over $520 million in equity funding, out of a total of $2.2 billion raised across Africa. This places Nigeria among the continent’s top destinations for tech investment. The growth trajectory is not new. In 2019, Nigerian startups secured approximately $747 million, accounting for about 37 per cent of all funding on the continent that year. These figures highlight the sustained interest in Nigeria’s tech ecosystem and its potential for future expansion.
A System in Transition
The central bank’s latest remittance policy, combined with broader financial reforms, signals a system in transition. By prioritising transparency, efficiency, and inclusion, the regulator is seeking to build a more resilient financial architecture capable of supporting long-term economic growth. As Nigeria continues to navigate the complexities of global finance, the success of these reforms will depend on their implementation and the ability of stakeholders to adapt.
