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New International Money Transfer Initiative excites Forex users

By BusinessNews Staff on September 29, 2014

The introduction of the Outbound Money Transfer service by the Central Bank of Nigeria (CBN)last month will not only reduce pressure from the foreign exchange market but will also save independent forex users from the hazzles associated with official and parallel foreign exchange market transactions, reports Festus Akanbi

I spite of the various interventions of the Central Bank of Nigeria at the various levels of the foreign exchange market for a very long time, the reality is that the naira has continue to be at the mercy of foreign exchange traders.
A closer examination of the trends in the forex market clearly showed that the pressure predated the tenure of the current Governor of the CBN, Mr. Godwin Emefiele, who stepped into the saddle in June.
These days, the movement of the naira exchange rates is also dependent on factors, which include CBN’s interventions at the the Retail Dutch Auction System (RDAS), dollar sale by the Nigerian National Petroleum Corporation (NNPC) and to some extent, remittances from abroad.
However, in spite of these channels of dollar inflow, experience has shown that growing demand from importers and other foreign exchange end-users and a shortage of dollar supply have continued to put the local currency under intense pressure.
Last week, naira traded around N163 to a dollar in spite of the recent sale of the greenback by NNPC which reinforced CBN’s intervention at the official market.

Outbound Money Transfer
To reduce the pressure on the foreign exchange market, the CBN last month launched the Outbound Money Transfer Services in partnership with the Western Union Money Transfer (WUMT).
Outbound money transfer is person to person international money transfer from Nigeria to countries around the world. Whether it’s a gift to friends or family living abroad or much needed funds for a travelling child.
The apex bank explained that each transfer is limited to a maximum of $2,000 per person.
On whether International Money Transfer operators will operate independent of banks, the CBN said no, explaining that the banks are to serve as agents for the IMTSO.
It was gathered that a customer can simply walk into his bank and request the service provided such a bank is an agent to any licensed IMTO.
The CBN guideline, however, said the platform could not be used to pay children’s school fees, explaining that in the case of school fees payment, customers will have to establish Form ‘A ‘through an authorised dealer bank.
Under this arrangement, a customer does not need to have foreign currency cash to effect a transfer. All he needs is the naira equivalent of the amount he wants to transfer with the charges expected.
The beneficiary gets the money immediately the transaction is completed. It is just like the normal inbound Western Union Money Transfer Service and the beneficiary will receive the full amount as long as the sender pays all the commission/charges.
The new initiative was coming on the heels of the approval of new guidelines for International Money Transfer Services in Nigeria.

Transforming Payment System
Speaking at the launch in Abuja, the CBN Governor said the project was in line with the bank’s policy to transform payment landscape in Nigeria.
Emefiele said the initiative was targeted at remittances by individuals to dependants, including children, living abroad and for other person-to-person needs, saying the system would also simplify money transfer process in Nigeria.
“Western Union Company is well known as international electronic payment transfer service provider with a wide range of products and global coverage.
“Since the commencement of the inward money transfer service in 1995, which was pioneered by this same company, the payment landscape in Nigeria has significantly transformed,’’ he said.
The CBN boss said that in-bound money transfer services had been in operation in Nigeria, and were dominated by Western Union, Royale Finance and MoneyGram.
“Today, out-bound money services is being launched to provide an alternative channel of foreign exchange transfer to serve the needs of small foreign exchange end users,” he said.
He added: “If you have the need to make payment to your children, brothers and sisters living abroad that need small financial support, all you need to do is to take your cash to any of the 5,000 Western Union outlets in Nigeria.
“We are working very hard to ensure that the number of outlets increases further from 5,000, even as we have also agreed with Western Union on the need for them to work with Bureau de Change (BDC) operators that are well structured,” he said, adding that the apex bank was also working hard to make the BDC business robust for operators in the sector.”
According to Emefiele, the initiative will go a long way in reducing pressure on the foreign exchange since it has simplified the use of foreign exchange for international transactions.
He said: “Simultaneously, it reduces the foreign exchange sourced from official foreign exchange window in Nigeria and to a large extent, helps to conserve our foreign exchange.’’
He explained that under the initiative, a prospective customer, who wishes to use the service, would only pay naira equivalent to the money transfer operators for the foreign currency that would be paid to the specified beneficiary abroad.
According to him, this will end the idea of going to the Bureau de Change or banks to buy foreign currency before transferring money abroad.
The governor explained that an agreement is being put in place to make sure that Western Union work with Bureau de Change (BDC) operators that are well structured.
He said the out-bound transfer service would only be conducted by international monetary service operators, adding that banks and BDCs that met the new CBN requirements would serve as agents for money transfer service.
He stated that bank accounts were not required to transfer funds and that transactions point would be within the reach of customers.
“We will allow cash, but going forward, we will discuss with operators of mobile telephones so that those on the mobile payment platform can transfer money from their accounts via western union to anybody abroad.
“These are some of the efforts we are making because we are embracing cashless transactions,’’ he said.
He said the apex bank had been working with relevant agencies to look at reasons for movement of cash out of the country.
He urged stakeholders to use all the channels available to transfer money and avoid carrying of foreign currency out of the country.
Emefiele explained that CBN had increased the allowable limit for credit and debit cards from $40,000 to $450,000 per annum.
He assured that the CBN would continue to provide effective leadership in the payment system transformation in line with the aspirations of the Federal Government.
Forex Traders Excited
Foreign exchange traders described the initiative as quite revolutionary and a good route taken by CBN. They however challenged the apex bank to adhere strictly to the issue of using any bank within its proximity for the service and not insist on having an account in the bank.
Industry watchers also stressed the need for the CBN to set up a monitoring unit in order to ensure that banks and other operators do not frustrate the new policy which they said will substantially reduce tension from the foreign exchange market.
The initiative, according to foreign exchange traders, will complement the effort of the apex bank in foreign exchange management. The first peg of this initiative was the recent revision of bureau de change capital base from N10 million to N35 million.
The CBN had in a circular expressed its readiness to regulate international money transfer services in the country.
The 19-page document, posted on the central bank website, is meant to ensure that money transfer services companies, agents, banks, and all those engaged in the provision of international money transfer services uphold global standards.
The guidelines read in part: “Allowable limit of the outbound money transfer shall be $2,000 or its equivalent per transaction, subject to periodic review by the CBN. All inbound money transfers to Nigeria shall only be disbursed to beneficiaries through bank accounts or mobile money wallets
“Where the beneficiary does not have a bank account or mobile money wallet, payments shall only be made upon the provision of a satisfactory reference from a current account holder in a bank, confirming that the beneficiary is the bona fide owner of the funds.”
According to the guidelines, the currency to be given to a money transfer agent for an outbound transfer shall be the naira; all outward payment transaction shall be executed in a convertible currency agreed between the parties.
It added: “Where a currency conversion service is offered before initiation of a payment transaction or at the point of payment, the money transfer services operator must disclose all charges, as well as the exchange rate to be used for converting the payment transaction.”