The Central Bank of Nigeria (CBN) recently launched the outbound money transfer service in Nigeria. Assistant Editor, Nduka Chiejina, looks at the issues involved and presents details of the guideline for the new service.
TIME was when Nigerians in the Diaspora hard pressed for cash or in critical need of financial assistance from their folks at home could enjoy such benefits. But from all indications, this may not be a problem anymore.
Thanks to the recent introduction of the Outbound Money Transfer service by the Central Bank of Nigeria (CBN), it is believed will reduce pressure on the foreign exchange market and save independent foreign exchange users the troubles prevalent with official and parallel foreign exchange market transactions.
Over the years the CBN had initiated several interventions to manage the foreign exchange market but the naira has remained perpetually tethered machinations of forex traders.
Justification for outbound money transfer
At the launch of the outbound transfer service in Abuja, it was revealed that Bureau De Changes can participate in outbound transfer of money from Nigeria to countries abroad.
According to the CBN governor, Mr. Godwin Emefiele, the CBN has “talked with Western Union and agreed that they have to work with Bureau De Change operators that are well structured.”
Conditions, he said, “will be given under which those Bureau De Change will qualify to become Western Union agents and the CBN will be providing a guarantee (of N10 million on behalf of BDCs that qualify to be on this scheme) to Western Union, Royal or Moneygram as guarantees for transactions that are done to ensure that they themselves feel secured to carry out these transactions without any problem.”
That N10 million CBN guarantee Emefiele said will be taken out of the N35 million mandatory deposits by Bureau De Changes with the CBN because the apex bank is working to see that the number of outlets that engage in the transfer of money outside Nigeria increases to more than the current 5,000.
According to Emefiele, “we will ensure that the guarantees are not called that is why we are going to put in place very stringent qualifying criteria to be met before you begin to be recognized as an agent to take on these transactions.” This he said is an opportunity for Bureau De Change Operators to also earn fees in areas that they would not before now have been introduced to make the business of Bureau De Change robust.”
Modus operandi
Under the guidelines regulating the outbound money transfer scheme, the banks and BDCs that have met the CBN new requirements will also serve as agents for money transfer services” Emefiele said.
The transactions that are covered under this initiative “include the maintenance allowance for children abroad, maintenance allowance for aged parents abroad, personal home remittances within allowable limits, cash gifts within allowable limits and other person to person remittances.”
Other measures that the CBN has introduced to manage the foreign reserve of the country the CBN governor stated “include measures to reduce foreign currency carriage and transportation outside the country, the CBN will be working with the relevant agencies where we will be looking at why people need to carry out so much cash from the country, for what purpose, if they cannot embrace the official channels that have been put in place then we will begin to ask them how much taxes they are paying for such large cash transaction out of the country.”
However, where individuals feel they are carrying out legitimate transactions, the CBN, Emefiele noted: “will encourage them to adopt the legal and formal means of handling those transactions. The CBN had earlier increased the limits for credit cards and debit cards from $40,000 to $150,000 per annum. The CBN will continue to provide leadership in the payment system transactions in line with the transformation agenda of the federal government of Nigeria.”
The pilot amount for outbound transfers is $2,000, “we want to start with $2,000 now to test how it will work before deciding whether to go higher. Naturally there are charges for outbound services those who receive money from relatives abroad know that those who send money to them pay certain charges, in like manner when you want to send money abroad you will have to pay charges, the exchange rate will be determined from time to time in line with the market” the CBN governor said.
Safety precaution
To check money laundering and other illegal transactions the CBN will be tracking transactions using the information collected from the customers, “returns will be taken, analysed and if it is found that a customer is using the channel for illegal transactions such customer will be cut off from the channel.”
Benefits of outbound transfer
The benefits of the outbound transfer service include the fact that payments for remittances abroad can be done in local currency, simplified remittance procedures and minimal control exchange documentation. In addition, bank accounts are not required to transfer funds and finally transaction points are within the reach of customers because of the existence of network of IMTO agents that we have in Nigeria.
The CBN will soon commence talks with agents to use mobile phones from any of the licensed mobile payment operators for Nigerians to send money from their naira accounts and instruct Western Union to deliver either dollars or pounds or whatever foreign currency to whoever they desire the money to be transferred to abroad.
Also with the aid of the internet Nigerians can give instructions to Western Union agents and the Naira is taken away from their accounts and effective dollar or pounds are delivered to their wards abroad. The CBN, Emefiele said, does not want its cashless policy to be only Naira cashed.
First Bank of Nigeria Plc’ Group Executive in charge of Operations, Mr. Akin Fanimokun, stated that “the launch of the outbound money transfer services into the Nigerian market means that for the first time Nigerians can send money out of the country to appointed destinations within minutes.”
First Bank, he disclosed, has opened “dedicated centres open seven days a week including public holidays and offer extended service from 8am to 6 pm. First Bank has consummated this partnership with Western Union in line with the bank’s mission to provide the best financial service possible while the benefit of this launch is the commission that will accrue to First Bank,” he said.
Aida Diarra, Regional Vice President for Africa, Western Union Money Transfer, in her remarks, stated that Western Union is present in more than 200 countries and territories and offers services to more than 5,000 locations worldwide.
Last year alone she said Western Union “processed more than 459 million business transactions, more than 260 million consumer to consumer transactions representing something like $82 billion of principal exchange between consumers.”
This, she noted, “is quite an achievement when you look at the number of countries we serve, we realize that remittance plays a key role in the economic dynamics and development of the countries, in most of them remittance represents more than 10 per cent of GDP and in most of them remittance is bigger than foreign direct investment.”
Western Union Money Transfer, she explained, has diversified portfolios made available to consumers with the help of new technology be it mobile internet and other technologies.
Today someone with a bank account can receive money directly with the account based Western Union through the internet platform of agent partners, through ATMs or through kiosks.
She added that this also “enables customers with electronic wallets to be able to collect their Western Union transactions directly onto their mobile wallets also making it possible for customers to collect their transaction through Western Union websites which is the first Receive-website globally that we have launched.”
Outbound transaction, the Western Union executive said, will enable financial inclusion by bringing consumers to Point of Sale to deposit naira and be able to send transaction or cash anywhere in the world. The reason it took so long for outbound money transfer to come to Nigeria, she disclosed, “is because everywhere we work we want to make sure that we do so in alignment with regulations placed in the given country. It is with the blessing of the CBN and the governor after we met the requirement necessary to offer outbound money transfer that we were able to do so now.”
The cost of the transfer transaction, she said, “will be in line with what obtains in Nigeria today. It will be per principal sum to be sent. Percentage varies according to the principal.”
Foreign exchange traders are happy with this initiative and have described it as revolutionary but that have urged the apex bank to set up a monitoring unit that will ensure that banks and other operators do not frustrate the new policy by strictly adhering to the issue of BDCs using any bank closest to them for the service and the banks not insisting on having an account with them. These measures the forex traders believe will substantially minimise tension in 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.
Guidelines
The CBN in the guideline it released to regulate outbound money transfer had stated that “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.”
In the guideline under the title: Disqualification of Shareholders and officers, the CBN noted that “in line with the BOFI Act No. 25 of 1991 [as amended], all the conditions stipulating the exclusion of certain individuals from the management of banks, shall apply to the management of Money Transfer Service Providers, except with the written permission of the Governor of the CBN.
Shareholders and officers of the company shall be disqualified, based on the provisions of Section 44 (2) of the BOFIA 1991 as amended. The section provides that: No person shall be appointed or shall remain a director, secretary or an officer of a bank who: is of unsound mind or as a result of ill- health is incapable of carrying out his duties; is declared bankrupt or suspends payments or compounds with his creditors including his bankers; is convicted of any offence involving dishonesty or fraud; is guilty of serious misconduct in relation to his duties; and in the case of a person possessed of professional qualification, is disqualified or suspended (otherwise than of his own request) from practicing his profession in Nigeria by the order of any competent authority made in respect of him personally.”
Non Permissible Activities as contained in the guideline states that “a money transfer operator is not authorised to: act as an authorized dealer in gold or other precious metals; engage in deposit taking and/or lending money; maintain current accounts on behalf of customers; establish letters of credit; act as a custodian of funds on behalf of customers; engage in institutional transfers. (A money transfer service operator shall not engage in any other business other than as authorised by the Bank.) and buy foreign exchange from the domestic foreign exchange market for settlement.
With regards to charges, all money transfer operators shall comply with the guide to money transfer charges, as provided by the CBN from time to time. The provider must make refund where wrong, inappropriate or disproportionate charges or fees are identified internally by provider.
Each operator shall provide a Complaints Management Unit to resolve complaints or disputes submitted by its customers. The unit guideline said “shall provide its services free of charge through well publicised and dedicated channels, including phone numbers and e-mail addresses.
An operator must fully investigate complaints and make appropriate decision and communicate same to the complainant within one week of the receipt of complaints. Each complaint shall be assigned a unique identifier for ease of reference and operators shall provide dedicated phone, email or other means by which complainants may enquire about the progress of their complaints. In addition, operators shall provide a response to all enquiries within 48 hours of receipt.
Where a complainant is dissatisfied with the decision, the operator shall provide an internal mechanism to review its initial decision. The review body must arrive at a decision within one week of receiving letter of dissatisfaction from a complainant; Where a complainant is not satisfied with a decision of a review body, the complainant may escalate the issue to the Director, Consumer Protection Department, Central Bank of Nigeria; and A provider shall render monthly returns on all complaints to the Director, Trade & Exchange Department, Central Bank of Nigeria, Abuja, in a format approved by the bank.
