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How to set up an International Money Transfer Service (IMTO) in Nigeria: A Simplified Guide
International Money Transfer Operators, or IMTOs, might sound like a mouthful, but they’re simply businesses that help people send money across borders. In Nigeria, these services have become even more essential. With families spread across continents and businesses expanding globally, the need to transfer money securely and quickly is growing exponentially.
The Rise of IMTOs in Nigeria
It’s fascinating to see how the landscape of international money transfer has evolved in Nigeria. From a mere 47 IMTOs in 2021, Nigeria now boasts 62 recognized operators, according to the latest figures from the Central Bank of Nigeria (CBN) as of July 12th, 2023.
Let’s break it down. What’s driving this surge?
Family Ties: Many Nigerians live, study, or work abroad. They send money back home for family support, property investments, or even just as gifts. These remittances are vital for many households.
Business Connections: Nigerian entrepreneurs are connecting with partners all over the world. These partnerships mean money needs to be transferred for various reasons – buying goods, paying for services, or just starting up a joint venture.
Tourism: As more tourists discover Nigeria’s beauty, they also need easy ways to access their money.
Big Names in the Game
Names like Western Union, MoneyGram, and TransferWise might ring a bell. These are some of the big players in the IMTO space in Nigeria, working hand-in-hand with local banks to make sure money gets to its destination safely.
Shocking Stats: The IMTO Impact
To give you a clearer picture:
Reports suggest that foreign exchange remittances to Nigeria could be as high as $25 Billion annually. That’s more than the GDP of some countries!
According to the World Bank, remittances to Sub-Saharan Africa grew to $42 billion in 2021. Nigeria, being the most populous country in the region, accounts for a significant portion of that.
With these staggering numbers, it’s evident why there’s a need to regulate the sector.
Regulations: The Do’s and Don’ts
The Central Bank of Nigeria isn’t just sitting back and watching. They’ve set up rules to ensure that IMTOs operate in a way that’s safe for consumers and beneficial for the economy. Here’s a straightforward breakdown:
What IMTOs Can Do:
Send money from one individual to another, either within Nigeria or abroad.
Help tourists get their money when they’re visiting Nigeria.
Facilitate small money transfers, like helping a student abroad receive their allowance from their parents in Nigeria.
What IMTOs Can’t Do:
Transfer money between businesses. They’re for individual transfers only.
Lend money.
Deal in gold, silver, or other precious metals.
Take deposits like a bank.
Handle huge institutional transfers, like when companies pay their foreign partners.
Starting an IMTO: Your Step-by-Step Guide
Thinking of riding the wave and starting your own IMTO? Here’s your step-by-step guide:
- Get Your Paperwork in Order: Start by preparing an application. This application should have:
- Your company’s details (like incorporation certificate and ownership structure).
Information about the company’s directors.
Your company’s business plan and how you plan to manage risks.
Any other information that shows the CBN that you’re serious and capable.
Pay the Application Fee: You’ll need to pay a non-refundable fee of 500,000 Naira to the CBN. - Prove You Have the Money: The CBN wants to ensure you’re financially stable. So, Nigerian companies need a minimum paid-up capital of 2 Billion Naira, while foreign companies need 50 Million Naira.
- Show Global Presence: One requirement is to prove that you operate in at least seven countries. This is to ensure that you have the experience and reach for this kind of business.
- Partnership Documents: If you’re teaming up with a foreign partner, you’ll need to provide proof of their financial stability and experience.
IMTOs are more than just businesses; they’re lifelines connecting millions of Nigerians to the global financial ecosystem. As Nigeria continues to establish itself as a significant hub for international remittances, understanding and navigating the IMTO landscape becomes essential for both entrepreneurs and consumers.
While setting up an IMTO might seem lucrative, it isn’t cheap or easy. Smaller Fintech companies that can’t meet these requirements often wonder if there’s another way to get in on the action. The answer? Yes, but with a twist. You’ll need to consult legal experts to understand what other options might be available.
The world is getting smaller, and Nigeria is becoming more connected to it. IMTOs play a pivotal role in this evolving narrative. Whether you’re thinking of using an IMTO to send money, receive funds, or even start one, it’s clear that they’re here to stay and will continue to shape the financial landscape of Nigeria for years to come.
