Cross-border payment services in Nigeria are regulated by the Central Bank of Nigeria (CBN), the apex bank in charge of the financial services regulation in the country. The International Money Transfer Operators (“IMTO”) licence of the CBN is required for the provision of cross-border payment services to Nigerians and foreigners in overseas countries. In Nigeria, no person or institution is permitted to provide international money transfer services or any form of cross-border payment services unless such person or institution has been duly incorporated by the Corporate Affairs Commission (“CAC”) and licensed by the Central Bank of Nigeria (“CBN”).
Below are specific services that are permissible for an IMTO licence holder:
(a) To accept monies for the purpose of transmitting them to persons resident in Nigeria or another country;
(b) To provide cross-border personal money transfer services, such as, money transfer services towards family maintenance and money transfer services favoring foreign tourists visiting Nigeria shall be allowed under this arrangement; and
(c) To provide money transfer services that target individual customers mainly and the transactions shall be on “person to person transfer” basis to safeguard against corporate customers that might structure their transactions into smaller amounts to circumvent the statutory reporting threshold.
It is noteworthy that an IMTO licencee shall not engage in any other business other than as authorized by the CBN. Specifically, an IMTO is not authorized to do the following:
(a.) Acting as an authorized dealer in gold or other precious metals;
(b.) Engaging in deposit taking and/or money lending business;
(c.) Maintenance of current accounts on behalf of customers;
(d.) Establishing of letters of credit; or
(e.) Acting as a custodian of funds on behalf of customers.
(f.) Engaging in institutional transfers.
(g.) Buying of foreign exchange from the domestic foreign exchange market for settlement.
In line with its statutory mandate for regulating and providing the framework for the licensing and operations of International Money Transfer Operators (IMTOs) in Nigeria, on 31st of January 2024, the CBN introduced a Revised Guidelines on International Money Transfer Services in Nigeria 2024 (“Revised IMTOs Guidelines”) under the cover of a CBN circular of same date to reform the Nigeria’s cross-border payment service space.
Some of the innovations introduced by the Revised IMTOs Guidelines are intended to:
- Liberalize the foreign exchange market and ensure transparency in foreign exchange market transactions;
- Boost diaspora remittances and other foreign capital flows to Nigeria;
- Promote efficient discovery mechanisms and evolution of an appropriate market determined exchange rate;
- Enhance the ease-of-doing business for IMTOs in Nigeria and money transfer recipients.
Please note that the money transfer services of an IMTO must target individual customers and the transactions shall be on “person to person”, “business to person” and “business to business” transfer basis which may be reviewed by the CBN from time to time.
The Revised IMTOs Guidelines takes effect immediately and all authorized dealers, IMTOs and general public are required to comply accordingly.
Below are some of the fundamental changes introduced by the Revised IMTOs Guidelines:
Ban of Banks and other Financial Technology Companies from undertaking IMTO services
The CBN has banned banks and other fintechs from providing IMTO services though banks can only act as agents of licensed IMTOs. In the previous IMTO Guidelines of 2014, only deposit money banks were prohibited from undertaking IMTO services but the new Guidelines has extended the ban to fintechs. In fact, all Fintechs are prohibited from seeking approval for IMTO services in Nigeria.
The implication of the above is that only licensed IMTO companies can undertake the permissible activities for an IMTO licencee.
Every IMTO is required to avail its agent bank a copy of its IMTO licence from the CBN or renewal of its IMTO approval for every year. Where an IMTO fails to comply with the foregoing, a bank is required to cease any further transaction with the IMTO. (see paragraph 2.3 of the Revised IMTO Guidelines 2024).
Increase of the capital requirement to $1,000,000 (One Million US Dollars)
Previously, the required share capital for setting up an IMTO was N2,000,000 (Two Billion Naira) for Nigerian company and N50,000,000 (Fifty Million Naira), or its equivalent in US Dollars, for a foreign company which has already been licensed elsewhere for cross-border payment services.
However, by paragraph 2.1 (x) the Revised IMTO Guidelines 2024 has increased the minimum share capital to $1,000,000 (One Million US Dollars) or its Naira equivalent for indigenous IMTOs.
Increase of the Non-Refundable Application Fee to N10,000,000 (Ten Million Naira)
Before the 31st of January 2024, the non-refundable Application Fee and annual renewal fee for IMTO licence was N500,000 (Five Hundred Thousand Naira).
However, effective from 1st February 2024, the non-refundable Application Fee and annual Renewal Fee for IMTO licence is now N10,000,000 (Ten Million Naira) or any other amount specified by the CBN from time to time, payable through electronic transfer or bank draft.
Please note that the payment for renewal of IMTO licence must be done before 31st January every year.
Prohibition of Outbound Cross-border Payments, etc.
Paragraph 3.2 of the Revised IMTO Guidelines 2024 prohibits IMTOs from engaging in other business operations than for which they are licensed. Also, IMTOs must not engage in any outbound transaction or buy foreign exchange from the domestic foreign exchange market for settlement.
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