Why CBN Stops Paying Diaspora Remittances In Foreign Currency And What It Means for Nigerians

Beneficiaries of diaspora remittances will no longer be able to collect money sent to them in dollars or any other foreign currency, as payments will now be made strictly in naira.

The Central Bank of Nigeria (CBN) issued this directive, which is set to take effect from May 1.

To implement the policy, the apex bank directed all International Money Transfer Organisations (IMTOs) to open naira settlement accounts. These accounts will now serve as the channel through which all remittance transactions are processed.

With this structure, IMTOs are required to route all remittance inflows through these designated naira accounts held with authorised dealer banks in Nigeria.

Why CBN Stopped Remittances In Foreign Currency

The CBN stated that the latest policy was aimed at deepening diaspora remittances while improving transparency, traceability, and monitoring of foreign exchange (forex) flows.

The move is part of broader efforts to strengthen foreign exchange inflows, reduce leakages in the system, and ensure remittances contribute more effectively to Nigeria’s economic stability.

By centralising remittance flows into naira accounts, the apex bank seeks to:
Improve oversight of foreign exchange transactions

Reduce the dominance of the parallel (black) market

Encourage use of the official forex window

Boost liquidity within the formal financial system

What It Means For Nigerians And Those In Diaspora

The implications of this policy are wide-ranging for both recipients in Nigeria and senders abroad.
The naira weakened slightly against the dollar in the official foreign exchange market on Wednesday, a day after the CBN introduced new measures to tighten oversight of remittance flows.

The exchange rate has been affected by multiple factors, including economic challenges, the impact of the COVID-19 pandemic, and global oil price fluctuations. As the apex bank, the CBN has taken steps to increase foreign currency circulation, but pressure on the forex market persists.

Despite efforts to boost liquidity, reports indicate continued strain on foreign exchange availability. One contributing factor is that some IMTOs and unlicensed operators already remit funds in naira, while others hoard dollars, worsening scarcity.

For Recipients In Nigeria:

They will no longer receive cash dollars, and funds will likely be converted at the official exchange rate instead of the higher parallel market rate.

This could reduce the actual value recipients get compared to before.
It may also discourage informal forex trading and dollar hoarding.

Limiting what goes into these accounts

The CBN has specified that these settlement accounts can only receive funds from diaspora remittances and proceeds from foreign exchange conversions done through approved market channels.

In simple terms, the accounts are strictly for handling inbound remittance money and related FX transactions, not for other business activities.

Mandatory disclosure and monitoring

Each IMTO is required to formally inform the CBN of all the accounts it uses for settlement purposes and keep this information updated. This gives the regulator full visibility into how remittance funds are handled and helps strengthen oversight of the system.

More flexibility in moving foreign exchange within the system
The guidelines allow banks to transfer foreign currency from an IMTO’s settlement account to other banks or approved participants, including Bureau De Change (BDCs).

Using real market rates for transactions

IMTOs must now use real-time rates from Bloomberg’s BMATCH system. This ensures fairer pricing, reduces exploitation, and improves transparency in the forex market.

Strengthening trust and compliance

The CBN has emphasised proper record-keeping and compliance with anti-money laundering and counter-terrorism financing rules, aligning Nigeria with global financial standards.

For Those In The Diaspora:

Sending money now requires using authorised IMTOs such as Western Union, MoneyGram, and WorldRemit.

Transactions will be routed through naira settlement accounts, eliminating the option of sending cash dollars directly.

This may increase confidence in formal channels but could reduce flexibility for senders who prefer dollar payouts.

Broader Economic Impact:

Increased inflow into official forex channels

Reduced pressure on the naira over time (if properly implemented)

Possible short-term dissatisfaction among recipients due to lower conversion value

Greater government control over foreign exchange flows

Has This Happened Before?

In 2020, the CBN introduced a policy allowing recipients to receive remittances in foreign currency (particularly dollars) to encourage inflows through official channels.

This reversed an earlier system where remittances were paid strictly in naira.
That policy led to a significant increase in recorded remittance inflows, as more Nigerians abroad began using formal IMTO channels instead of informal networks.

However, over time, challenges emerged:
Dollar hoarding by recipients and middlemen

Increased pressure on forex supply
Growth of the parallel market

Arbitrage opportunities between official and black market rates

The current directive effectively marks a shift back toward tighter regulation though not a full reversal by ensuring that inflows are captured within the banking system while still allowing foreign exchange to circulate among authorised dealers.

The CBN’s decision to stop remittance payouts in foreign currency represents a major shift in Nigeria’s foreign exchange management strategy. While the policy is designed to improve transparency, strengthen the naira, and boost official forex inflows, it also introduces new realities for millions of Nigerians who depend on diaspora support.

For recipients, the biggest change is the loss of direct access to dollars, while for those in the diaspora, the system becomes more structured but less flexible.