In a surprising step (?), The Central Bank of Nigeria has shut down the money transfer operators and limited the distribution of legal money transfers to only three companies, namely
• Western Union
• MoneyGram e
CBN has now marked all other money transfer operators as illegal and has sent messages to banks to suspend money transfer operations for all operators except the MTOs mentioned above.
Why was money transfer (this step)necessary?
To understand why CBN has taken such a drastic step it is necessary to understand the mindset in Nigeria regarding money transfers. There are literally dozens of money transfer operators working in Nigeria as it is a policy to receive foreign currency and then deliver it to the central bank for Nairas. payee account credited via local deposit.
This weakens central banks’ reserves because they don’t see the currency in their foreign exchange reserves, while Bureaux De Change traders settle returns (i.e. the sale of foreign currency) with those who want to buy them (for investment). . / rescue purposes. or for those who want to bypass the central bank exit limits).
This parallel market, as we know, has put pressure on the rise in exchange rates against the Naira, hence the parallel market rate in Lagos, which is much higher than the official rate.
The price difference between the official rate and the open market (or parallel market) is significant, equal to your preference for the former.
Once the activities of all other MTOs are closed, there is essentially no safe method for MTOs outside Nigeria to send money to exchange traders. The only way to receive money is to send foreign currency directly to someone else’s Nigerian Forex account. It is also believed that this channel is widely used and therefore suppressed.
The competition has already started to cry. For example, I sympathize with them, but if I were the governor of the Central Bank of Nigeria, I would be more aware of the measures they have taken (even if I don’t quite agree with the controls they put in place). ) in situ).
MTOs sending money to Nigeria have managed to break the system for their own benefit (and rightly so). If a sender can get about 400 nairas for every US dollar sent, why in their sensitive mind would they pay the official 300 naira fee?
It just doesn’t work well for the transmitter.
Frankly, it doesn’t matter to the sender whether the money is sent through an official channel, a gray channel, or even a black channel. They just want a higher return on investment.
Nigeria is not a springboard when it comes to overpayments. With an annual inflow of more than $ 21 billion, every cent that goes into the official treasury counts.
In light of the drop in oil prices (as of August 3, 2016), where they are below $ 40 a barrel, Nigeria is in a good economic position.
As an oil-dominated economy, Nigeria experienced an unprecedented boom due to rising oil prices. It was the unexpected response to Nigeria’s economic problems, namely the fight against low industrial production (excluding oil), high unemployment, unchanged corruption, religious divisions, a political and bureaucratic system that uses corruption as oxygen in Oil. a presentation (regardless of your specific religious preference or not).
President Muhammadu Buhari has been opposed to the resistance of the Nigerian naira in the floating currency for months. Reluctantly, he agreed to let the market decide on the free (and fair) price of Naira in early June 2016. The market, which should be sufficient, will help Naira to appreciate against the dollar.
This did not happen.
Since January, the currency has lost 35% of its value in relation to the major currencies (ie USD, EUR, and GBP). The necessary flexibility was not in the direction that President Buhari expected.
Analysts continue to say that Naira is overvalued and is expected to lose about 20% more before stabilizing. This caused many people to accumulate foreign exchange in Nigeria.
With interest rates of 14% and inflation of 16%, a huge budget deficit, it is no wonder that the Treasury likes it so much.
Future of payment operators?
This can be done in different ways.
To begin with, the government will do everything in its power to increase the liquidity of the US dollar and other currencies on the market. It has already issued a circular on the subject: sale of foreign currency through international transfers to foreign exchange operators.
The fear is that such repression will always unilaterally create a return channel for cash flow. Innovative ways of paying are likely to increase.
Nigerian businessmen apparently switched to the informal transfer industry overnight. The black market interest rate will not fall, nor will the difference between medium and long-term interest rates and open market interest rates.
As there is also strong pressure on the issuing market, an increase in informal cleaning activity is expected.
The future of other money transfer companies is unclear. Personally, I think the list will expand to Transfast, TransferWise, XpressMoney, WorldRemit, etc. Now.
Smaller players will definitely be avoided. For now, the game is over (officially) for them.
In fact, it is blocked for many Nigerian diasporas that send money regularly through TransferWise and similar financial services. Your only option is Big 3 or a return to random channels. The latter is more likely.
The road to economic recovery is not an easy one for Nigeria. While this may seem difficult, CBN steps can be very necessary. Other midsize players need not worry, I think CBN will eventually open the door for them.