Nigeria’s Central Bank has reversed a controversial decision which severely curtailed small to medium sized money transfer companies from operating in the country and favored only the biggest players.
On Aug. 2, Nigeria’s Central Bank issued a new directive (pdf) limiting the operations of money transfer operators (MTO) in the country. The directive, which mandated MTOs to remit foreign currency to the local banks for disbursement in naira, prevented a number of MTOs who operated through forex swaps with local partners from operating in Nigeria.
In addition to the directive, MTOs looking to operate in the country had to fulfill the central bank’s tight requirements: a net worth of $1 billion, operations spanning 20 countries and a minimum of 10 years of industry experience. As a result, only three MTOs—Western Union, MoneyGram and Ria—were left free to operate in the country.
Cutting off the MTOs, it was argued, enshrined a lack of competition in the money transfer market. As Quartz earlier pointed out, the move was contrary to global efforts to drive down the cost of remittances.
But almost a month later, the bank has seemingly reversed its decision. Adopting less stringent guidelines from 2014, the bank has issued licenses to eleven new MTOs. The bank says the change in tack is part of efforts to “liberalize the foreign exchange market, ensure liquidity and make foreign exchange more readily available to low end users.” At a time when Nigeria’s foreign earnings have fallen amid the country’s first economic recession in decades, remittances, which totaled $21 billion last year, will serve as an increasingly important source of forex to combat a biting dollar shortage.
Ismail Ahmed, CEO of WorldRemit, one of the newly licensed MTOs told Quartz the policy reversal is down to lobbying by UK-based MTOs who argued that the ban was “was forcing Nigerians to use informal remittance networks.” According to Ahmed, 50% of remittances to Nigeria currently through “unregulated” channels.