Remittance provider WorldRemit has called Central Bank of Nigeria (CBN)’s new rules draconian following the shutting down of all but three money transfer operators (MTO) unable to meet the new guidelines. Only three traditional remittance operators Western Union, MoneyGram and Ria are still in business, leaving fintech companies reeling with the loss of business. Nigerians abroad remitted $20 billion in 2015, holding the 6th spot worldwide.
Until now, money transfer operators such as WorldRemit operated via partnerships with licensed local correspondents in Nigeria, enabling transfer of funds to local bank accounts – providing a more efficient service than the SWIFT infrastructure.
WorldRemit is a world leader in transfers to Mobile Money accounts and had been planning to launch remittances to Mobile Money services in Nigeria. Nigeria’s laws have in effect curbed development of the currently booming fintech companies which are usually startups. Have a look at some of the new guidelines…
CBN conditions for international mobile money remittances license
- Be a registered entity, licensed in its home country to carry on money transfer activities
- Have a minimum net worth of US$1 billion, as per the latest audited financial statement, or as may be determined by the CBN from time to time.
- Should hold a valid Money Money Operator’s license.
- The institution should be well established (operate in at least twenty countries with at least 10 years experience) in the money transfer business with a track record of operations
- There should be a MOU that clearly delineates liabilities in the even of disputes and/or process failures
Guidelines on international mobile money remittance service in Nigeria (PDF)
Quotable “This move is arbitrary, inexplicable and hugely detrimental to the Nigerian diaspora who rely on hundreds of money transfer companies and banks, providing them with choice, convenience and competitive pricing.CEO
“Even now, as we suspend our service, there is no clarity on why this sudden change has happened. If it is on the basis of new rules, there was no warning. If it is a re-interpretation of old rules, local correspondent networks and banks should have been forewarned.
“This reverses the progress made by the country when the Nigeria Central Bank banned Western Union’s exclusivity agreements (PDF) that had created a near-monopolistic position in the international money transfer market. Western Union controlled 78% of the market share when CBN outlawed exclusivity agreements with local banks.” WorldRemit founder and CEO, Ismail Ahmed
Useremit CEO’s take on the suspension
Stone Atwine, CEO of useremit.com has this to say about the stringent measures the CBN has taken: “…the challenge they have is that the central bank wants to change all Forex to Naira and then sell the Forex to dealers in the open market. E.g. The central banks current $ rate is 310N whereas a remittance company that sells their incoming dollars on the open market will get 400N or more.
“Only few companies are authorized to do remittances by the central bank. Others have correspondent licensed partners and don’t deal directly with the central bank. The central bank is trying to control the exchange rate through pricing but it’s futile the truth is that the Naira is over valued as it were.”
Nigeria’s new guidelines could be interpreted as a ploy to curb the growth of fintech companies by the old money transfer pioneers like Western Union and Moneygram. The traditional MTOs usually charge a premium on transactions and have been rather slow to take advantage of new technologies. Startup success stories have shown time and again that technology and innovation drives economies. Nigeria’s stances sets the country and continent at large backwards after making great strides.