CBN Directs Banks to Close Naira Accounts for IMTO Proceeds

•Naira strengthens on parallel market to N460

By Obinna Chima

Following its new policy that grants unfettered access to forex from Diaspora and other money transfer

remittances, the Central Bank of Nigeria (CBN) yesterday directed all banks to close all naira ledger accounts opened for receiving International Monetary Transfer Operators’ (IMTOs’) proceeds.

The central bank, in a circular with reference number: “TED/FEM/FPC/GEN/01/013,” dated December 02, 2020, jointly signed by its Director, Banking Supervision, Dr. Bello Hassan, and the Director, Trade and Exchange Department, Dr. Ozoemena Nnaji, obtained by THISDAY yesterday, demanded an immediate compliance with the directive.

The letter, addressed to all managing directors of deposit money banks was titled: “Re: Amendment to Procedures for Receipt of Diaspora Remittances.”

It said: “Following our Circular Ref. No. TED/FEM/FPC/GEN/01/011 of November 30, 2020, regarding operations of diaspora remittances, all banks are hereby directed to close all naira ledger accounts opened specifically for the purpose of receiving IMTO proceeds with immediate effect.

“In addition, please note that IMTO beneficiaries/recipients are to receive their proceeds in foreign currency (USD) or have it deposited in their domiciliary account in a Nigerian bank.

“It is at the sole discretion of the recipients to either choose foreign currency cash or have the proceeds deposited into their domiciliary accounts in Nigeria. Please confirm compliance with this directive to the CBN by close of business today, December 2, 2020.”

Also, yesterday, the central bank, in a separate circular, clarified its new rule on receipts of forex inflows from Diaspora remittances.
It made the clarification in a circular titled: “Re: Amendment to Procedures for Receipt of Diaspora Remittances,” dated December 2, 2020, which was signed by Nnaji.

It said: “Further to the Circular Ref. No. TED/FEM/FPC/GEN/01/011 of November 30, 2020, on the above subject, we wish to reiterate and clarify to all IMTOs the following: IMTOs must ensure that all funds in favour of beneficiaries/recipients in Nigeria be deposited into the agent banks’ correspondent account.

“Agent banks (deposit money banks) in Nigeria will be responsible for all payment to beneficiaries/recipients either in foreign currency cash (USD) or into the beneficiaries’/recipients’ domiciliary account in Nigeria.

“The mode (if payment either in cash or transfer is at the sole discretion of the beneficiaries/recipients. Please ensure strict compliance and be guided accordingly.”

These policies came less than 24 hours after the CBN introduced special bills to support economic recovery and deepen the financial market.

The 90-day special bills are expected to avail the monetary authority additional liquidity management tool.

The CBN stated in a circular addressed to all banks, dated December 1, 2020, signed by Hassan that the features of the special bills include tenor of 90 days, zero coupon, applicable yield at issuance to be determined by the CBN; the instrument will be tradable amongst banks, retail and institutional investors.

Also, it added that the instrument shall not be accepted for repurchase agreement transactions with the CBN and shall not be discountable at the CBN window. The instrument will also qualify as liquid assets in the computation of liquidity ratio for deposit money banks.

“The CBN will continue to ensure optimal regulation of systemic liquidity and promote efficient financial markets in support of economic recovery and sustained growth,” it added.

However, the new monetary policy by the CBN has started impacting on the value of the naira, which appreciated on the parallel market yesterday.

The naira, which went for N480 to a dollar on the parallel market on Tuesday, appreciated to N450 to a dollar yesterday, before it weakened to N460 to a dollar at the close of business.

The CBN had explained that the new regulation was part of efforts to liberalise, simplify and improve the receipt and administration of Diaspora remittances into Nigeria.

With the new policy, recipients of remittances may have the option of receiving such funds in foreign currency cash (US Dollars) or into their ordinary domiciliary account.

“These changes are necessary to deepen the foreign exchange market, provide more liquidity and create more transparency in the administration of Diaspora remittances into Nigeria,” the central bank had stated.