Obtaining an International Money Transfer Operator (IMTO) License in Nigeria is essential for any entity looking to engage in the transmission of remittances into and out of the country. IMTOs are regulated by the Central Bank of Nigeria (CBN), which provides clear guidelines and requirements for obtaining an operating license. It is illegal for any individual or entity to provide international money transfer services in Nigeria without first securing this license.
This article explains what an IMTO is, the services they provide, and the steps to acquire a license. Additionally, it covers other regulatory requirements for operating an IMTO business in Nigeria. If you have any questions regarding setting up an IMTO in Nigeria, feel free to contact us to schedule a consultation.
Legal Definition of an International Money Transfer Operator
An International Money Transfer Operator (IMTO) is a licensed entities approved by regulators to facilitate the transfer of funds from individuals or entities residing abroad to recipients in Nigeria. In other words, IMTOs serve as intermediaries that manage the transfer of funds from senders overseas to beneficiaries within Nigeria.
IMTOs play a crucial role in diaspora remittances. According to statistics from the World Bank, Nigerians living abroad remitted $20 billion in 2023, with $21 billion sent the previous year. These figures underscore the importance of IMTOs in the remittance value chain. Moreover, with advancements in financial technology, most IMTOs now provide services through mobile and web applications, making it easier for users to send and receive global remittances.
Who Can Establish an International Money Transfer Operator in Nigeria?
An IMTO in Nigeria can be established by the following:
- Individuals
- A group of individuals
- A foreign-licensed IMTO
- A corporate entity
However, the following are disqualified from establishing an IMTO:
- Banks
- Fintech companies
Permissible & Non Permissible Activities for International Money Transfer Operator in Nigeria
IMTOs like other financial institutions have permissible and non permissible activities. The permissible activities are those products and services that an IMTO is allowed to provide. Whereas the non-permissible activities are prohibited for IMTOs.
Permissible Activities IMTOs in Nigeria
Licensed IMTOs in Nigeria are allowed to engage in inbound international remittance activities only. Their authorized services include:
- Receiving and transmitting money sent from abroad to persons or entities in Nigeria.
- Cross-border personal money transfer services such as sending funds for family maintenance or to tourists visiting Nigeria.
- Transfers limited to person-to-person, business-to-person, and business-to-business transactions, subject to review by the CBN.
Non-Permissible Activities for IMTOs in Nigeria
The following activities are prohibited for IMTOs:
- Engaging in any business activities outside those listed as permissible.
- Conducting outbound transactions, such as sending remittances from Nigeria to recipients abroad.
- Acquiring or purchasing foreign exchange from the domestic foreign exchange market for settlement purposes.
Costs of Obtaining an IMTO License in Nigeria
Establishing an IMTO in Nigeria involves several costs, including registration, application, and operational expenses. The following are specific costs related to obtaining an IMTO license:
- Application Fee: N10,000,000 (non-refundable)
- Minimum Share Capital: US$1 million for foreign IMTOs, or its Naira equivalent for indigenous IMTOs.
- License Renewal: A N10,000,000 renewal fee must be paid annually, within the first quarter.
Procedure for Obtaining an IMTO License
The application process for an IMTO license involves two stages:
Application for Approval In Principle (AIP)
The AIP allows the IMTO to open a bank account and commence pre-operational procedures. However, it does not grant the right to begin operations. Documents required for the AIP include:
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- Evidence of payment of the application fee.
- Approval to operate in other jurisdictions (for foreign IMTOs).
- Incorporation documents (for indigenous IMTOs).
- Details of the company’s ownership structure, key officers, and shareholders.
Application for Final Approval
After receiving the AIP, the IMTO must apply for final approval within three months. Required documents include:
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- Names of authorized dealer banks serving as local agents.
- A detailed business plan, outlining internal control systems, IT policies, and financial projections.
- Agreements with participating parties and a project deployment plan.
Conclusion
The process of obtaining and maintaining an IMTO license in Nigeria is both comprehensive and stringent, reflecting the regulatory importance of the money transfer sector. By ensuring that only qualified individuals and entities can operate IMTOs, the Central Bank of Nigeria aims to safeguard the integrity of the international remittance system. Given the significant role of remittances in Nigeria’s economy, particularly in terms of foreign exchange and diaspora support, the operation of IMTOs is a crucial aspect of the country’s financial landscape. Proper compliance with regulatory requirements ensures the stability and sustainability of these services, enabling safe and efficient fund transfers for millions of Nigerians.
