Dissecting Renewed Efforts To Reshape Nigeria’s Remittance Ecosystem

In this article, MARK ITSIBOR writes on recent efforts by the monetary and fiscal authorities to reclaim control over foreign remittances — raising fresh questions about transparency, trust, and the future of remittances.

Few financial flows into Nigeria rival the quiet but powerful impact of diaspora remittances. Year after year, billions of dollars sent home by Nigerians abroad sustain households, fund education and healthcare, and provide critical support for small businesses.

In macroeconomic terms, these inflows have become one of the country’s most reliable sources of foreign exchange — often rivaling, and increasingly complementing, oil revenues. Estimates show that Nigeria receives between $20 billion and $25 billion annually in remittances, underscoring their central role in economic stability and social welfare.

Yet, for all their importance, the full economic value of these inflows has long eluded the Nigerian economy. A significant portion of remittances has historically bypassed the formal financial system, flowing instead through informal and unregulated channels.

Studies suggest that as much as 50 per cent of remittance inflows may be routed outside official systems, largely driven by exchange rate disparities and inefficiencies in formal channels.

This structural gap has carried a steep cost. With total remittance inflows estimated at over $20 billion annually, the implication is that billions of dollars — potentially in excess of $10 billion each year — circulate beyond regulatory visibility.

The funds, while still reaching households, often fail to translate into broader economic gains such as reserve accretion, improved liquidity in the official foreign exchange market, or enhanced monetary policy effectiveness.

It is within this context of opportunity and loss that the Central Bank of Nigeria (CBN) has introduced a major policy shift, directing all International Money Transfer Operators (IMTOs) to open naira settlement accounts and route remittance transactions through them. From May 1, beneficiaries will receive diaspora remittances in naira rather than dollars. It was introduced in alliance with the fiscal authorities.

The directive represents a significant recalibration of Nigeria’s remittance architecture. At its core, it seeks to ensure that inflows are fully captured within the formal banking system, improving transparency, traceability, and regulatory oversight.

Under the new framework, IMTOs are required to process all remittance transactions through designated settlement accounts maintained with authorised dealer banks. These accounts are to serve as the exclusive channels for disbursements and foreign exchange conversions.

The CBN has also introduced pricing guidelines aimed at addressing long-standing distortions in the market. Operators are now required to benchmark their rates against real-time data from Bloomberg’s BMatch platform, a move designed to improve price discovery and reduce information asymmetry.

While the objectives are clear, analysts note that the policy’s impact will ultimately depend on how it interacts with market realities.

For many Nigerians, remittances are more than macroeconomic variables—they are daily lifelines. As such, any change in how these funds are delivered is likely to influence user behaviour.

One key concern is whether naira-only disbursement could affect the appeal of formal channels, particularly in a market where exchange rate differentials have historically shaped decisions. Economist, Dr. Bismarck Rewane, observes that while formalisation is necessary, pricing remains critical. “The system must reflect market realities. If it does not, users will naturally gravitate towards alternatives,” he said.

Similarly, financial analyst, Mr. Olabode Agusto, notes that while the policy could improve liquidity management within the banking system, its success will hinge on credibility and ease of access. “The formal system must be efficient, transparent, and competitive. Otherwise, the intended benefits may not be fully realised,” he added.

These views reflect a broader understanding: remittance systems are not just regulatory constructs—they are behavioural ecosystems shaped by trust, convenience, and value.

The naira settlement directive forms part of a wider reform agenda by the CBN aimed at modernising Nigeria’s cross-border payment systems.

Speaking at the G-24 Technical Group Meetings in Abuja earlier this year, CBN Governor Olayemi Cardoso highlighted persistent inefficiencies in global remittance systems, including high transaction costs, settlement delays, and fragmented infrastructure.

According to the CBN Governor, the challenges continue to limit participation in global trade, particularly for households and micro, small and medium enterprises.

Globally, remittance costs remain above six per cent on average, while settlement delays can extend over several days. These inefficiencies reduce the effective value of funds and constrain economic participation.

Cardoso also pointed to emerging risks associated with digital payments, including exchange rate volatility, capital flow pressures, and regulatory fragmentation—underscoring the complexity of reforming the system.

In response, the CBN has strengthened its anti-money laundering and counter-terrorism financing frameworks, aligning them with global standards. It has also introduced simplified compliance requirements for low-value transactions to encourage broader participation.

Nigeria’s recent removal from the Financial Action Task Force (FATF) grey list adds an important layer to these reforms.

The development signals progress in strengthening regulatory frameworks and addressing deficiencies related to illicit financial flows.

It also has implications for investor confidence and Nigeria’s integration into global financial markets.

CBN Governor Cardoso described the delisting as a validation of the country’s reform trajectory, while industry stakeholders have noted its potential to ease pressures in the foreign exchange market.

President of the Association of Bureaux De Change Operators of Nigeria, Dr. Aminu Gwadabe, said the move has helped to restore a measure of confidence in the financial system.

However, analysts caution that sustaining these gains will require consistent policy implementation and continued adherence to international standards.

Alongside regulatory reforms, Nigeria’s remittance landscape is being reshaped by rapid growth in financial technology.

Over the past decade, the country has emerged as one of Africa’s leading fintech hubs, attracting significant investment and driving innovation in digital payments.

In 2024 alone, Nigerian startups raised over $520 million in equity funding, reflecting strong investor interest despite global uncertainties.

For policymakers, this presents both opportunities and challenges. Digital platforms can enhance efficiency and expand access, but they also require robust oversight to mitigate risks.

The CBN’s regulatory sandbox initiative represents one approach to managing this balance, allowing fintech firms to test new solutions under controlled conditions.

The transition to naira-based remittance disbursement marks a notable shift in Nigeria’s financial policy framework.

It attempts to address long-standing inefficiencies, improve oversight, and align remittance flows more closely with domestic economic objectives. At the same time, it introduces new dynamics that could reshape how individuals and businesses engage with the financial system.

Much will depend on execution. Exchange rate competitiveness, operational efficiency, and user confidence will all play critical roles in determining the policy’s outcome.

What is clear, however, is that Nigeria is confronting a long-standing paradox: how to convert one of its most significant financial inflows into a more structured and measurable driver of economic growth.

The answer, as this latest policy suggests, lies not only in regulation—but in aligning incentives, rebuilding trust, and closing the gaps through which billions have long slipped.