Afolabi Oriyomi, an expert in the financial services industry and the research head, research head, Young Professionals and Emerging Leaders (YPEL), has warned that the Central Bank of Nigeria’s recent directive to the International Money Transfer Operators may divert foreign exchange liquidity to the black market.
He also notes that while some Nigerians may resort to Cryptocurrency as an alternative route, the absence of implemented systems to monitor concurrency transactions within the economy will diminish the benefits of increased cryptocurrency usage in Nigeria.
He was however of the opinion that the impact of the policy on the Nigerian economy will be contingent on the adaptability of its financial ecosystem.
He made this known in an exclusive interview with our correspondence on Monday when airing his views on the recent policy of the government through the Central Bank of Nigeria (CBN) directing International Money Transfer Operators and banks to halt the payment of dollars to their customers, but instead pay the naira equivalent.
Earlier, the Central Bank of Nigeria (CBN) barred international money transfer operators (IMTOs) from paying Nigerians in foreign currencies, which implied that Nigerians abroad would no longer be able to send dollars or any foreign currency into bank accounts in the country.
Our findings revealed that the international money transfer operators (IMTOs), had removed the options of sending dollars or other foreign currency to Nigeria on their websites and mobile applications in compliance with the CBN directive. Consequently, Nigerians abroad are only allowed to transfer the naira equivalent amount of the foreign currency.
Speaking further, he noted that, the core purpose of diaspora remittances is primarily to support families in Nigeria, but was quick to assert that the Central Bank of Nigeria (CBN) directing restricting payout options for International Money Transfer Operators (IMTOs) to only naira will likely prompt the exploration of alternative channels for diaspora remittances.
Among these alternatives, cryptocurrency stands out, particularly given Nigeria’s prominent position as the 6th largest global market for cryptocurrency transactions.
The potential for increased crypto transactions is probable.
Similarly, Mr. Bolaji Babalola, an expert in cryptocurrency related matters, said:
“On the face value, it is a good policy in the sense that most of those payments processed by International Money Transfer Operators (IMTOS), a lot of times ends up in the black market, people withdraw the dollars and then sells to the black market because of the higher exchange rates,
He stressed that this policy gives Nigerians the opportunity to get the equivalent of dollars in naira, which means the money will remain in the Nigeria Banking system and the receiver will only get the naira equivalent of the foreign currencies, be it dollars, or pounds, will be in the banking system.
Bolaji raised concern that although the policy was supposed to boost liquidity in the official market, but “the Nigeria factors” will also play out Nigeria’s commercial banks are part of the problems we have when it comes to foreign exchange or currencies especially hoarding and the likes which they had been known for since time immemorial.
So, it should boost liquidity in the official market, I think some people prefer it, but it is a kind of two phase, someone who offers services to clients abroad may prefer it, and some may not.
Again Afolabi noted that limited literacy levels regarding cryptocurrency usage could pose a significant barrier to increased adoption. Additionally, the fact that cryptocurrencies are not universally accepted for the payment of goods and services limits their usage.
Furthermore, the high volatility of cryptocurrency prices and the absence of robust safeguards against loss or fraud, given the susceptibility of cryptocurrency to cyberattacks and hacking, may hinder its widespread adoption.
He affirmed that an increase in cryptocurrency adoption could potentially divert funds and foreign exchange liquidity to the parallel market, undermining the immediate objectives sought by the CBN’s directive to restrict USD transfers for IMTOs.
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