“No fee” remittances: What really happens when you send money to Nigeria

When my friend, Faruq, opens his phone to send money to Nigeria from Canada, everything feels simple. He taps the app, checks the exchange rate, and hits send. Five minutes later, his family receives the money. No transfer fees. No hidden charges. At least that’s what he thinks.

“There are usually no charges, hidden or not,” he tells me. He stopped using informal channels back in 2020 because fintech apps felt safer and more reliable. The rates looked better than what he used to get from people he knew. Everything happened fast. Everything seemed clear.

But Akinsola Jegede sees something different. He founded VitalSwap, a remittance fintech, and he has spent years mapping out exactly what happens when money moves between countries. According to him, most people have no idea where they actually pay.

Nigeria received over $20 billion in remittances last year. That money travels from London, Toronto, New York, and dozens of other cities into Lagos, Abuja, and villages across the country. But the journey is never as simple as it looks on your screen.

The illusion of movement

Most people imagine their money flying across the ocean. You send £100 from London, and it lands in Lagos a few minutes later. That’s not what happens.

“That £100 does not move to Nigeria,” Jegede says. “It stays in the UK or enters Western Union’s global pool.”

How your money flows when you send money to Nigeria

Traditional operators like Western Union work with local Nigerian banks and agents. These banks verify transactions, release cash, and reconcile balances later. They are not just banks. They are more like point-of-sale agents at a massive scale. They need infrastructure, compliance teams, and huge amounts of liquidity sitting in accounts. All of that costs money.

When you walk into a store and pay £100 plus a £6 transfer fee, that money enters a system with many hands. Western Union takes a cut. The UK bank or store agent takes a cut. The Nigerian payout bank takes a cut. Sometimes correspondent banks take a cut, too.

But the highest cost is not in those visible fees. It hides in the exchange rate.

“By the time FX is applied, you’re left with something closer to £90 worth of value,” Jegede explains. You sent £100. Your family receives the equivalent of £90. The other £10 disappeared into exchange rate markups that nobody explained to you.

The fintech promise

Newer fintech entities say they are different. They claim to cut out the middlemen. Instead of a long chain of banks and agents, the structure becomes simpler. Fintech to bank to customer. That’s it.

The model works through something called local in, local out. When you send £100 from the UK, that money stays in the UK. The fintech company already has naira sitting in Nigeria. They credit your family’s account using that local liquidity. No need to wait for daily reconciliation across borders. No need for as many intermediaries.

“Transactions are faster, FX is closer to the market rate, and fees are lower or sometimes zero,” Jegede says.

This matches what my friend experiences. Fast transfers. No visible fees. Rates that look better than what banks offer. He trusts the system because it works smoothly.

But Jegede insists that zero fees do not mean zero cost.

The rate you don’t see when you send money to Nigeria

Here is what most people miss. When a fintech app advertises “Send to Nigeria at ₦2,200 per pound,” they are often showing you one rate. But that might not be the rate you actually get.

“Most Nigerians believe the rate for pounds to naira equals the rate for naira to pounds,” Jegede says. “It doesn’t.”

The rate advertised is often the rate for sending money from Nigeria to the UK. But you are doing the opposite. You are sending pounds to Nigeria. That transaction uses a different rate. Maybe ₦2,150 per pound. Maybe less.

The difference comes down to supply and demand. Which currency is scarce? Where is liquidity sitting? Who is holding the risk? Those factors determine the rate. And most apps know that customers assume the rates go both ways. So they advertise the better number.

“Before falling for marketing ads, the real question to ask is which currency pair is being applied to my transaction,” Jegede says. “If you don’t know that, you don’t know the real cost, even if the fee is zero.”

This is probably why my friend sees no fees, but Jegede insists users still pay. The cost just moved from a transfer fee to the gap between the advertised rate and the real rate.

Why it cannot be free

Even fintech entities that eliminate many middlemen still have costs. Jegede’s company had to suspend operations for eight months just to get properly licenced.

“The real cost of licencing is not application fees or minimum capital requirements,” he explains. “The real cost is everything around it.”

You need lawyers. You need accountants. You need auditors. You need compliance officers. You need a team that can navigate regulations, structure the business correctly, and pass audits year after year. That team costs serious money.

So while fintech entities can charge less than Western Union’s 7-12% fees, they cannot offer truly free transfers and survive. The cost just becomes less visible.

“Customers don’t pay less because fintechs are generous,” Jegede says. “They pay less because the system is simpler.”

My friend has not used informal channels since 2020. Those were the “I know a guy” arrangements where someone you trusted would take your Canadian dollars and arrange for naira to reach your family. The rates were often better because these operators worked in parallel markets with less overhead. But the risks were real.

No recourse if something went wrong. No transaction history. No way to trace your money if it vanished.

“Most fintech apps are reliable, give better rates, and are generally safe to use,” my friend tells me. “They are also convenient and traceable.”

That convenience matters. Transactions are complete in five minutes. You get confirmations. You can show proof of payment. For most people, the trade-off makes sense. Pay a bit more for peace of mind.

But as Jegede points out, most users have no idea how much more they actually pay.

What $20 billion means

When over $20 billion flows into Nigeria every year, small percentages become huge numbers. If every transaction loses 3-7% in hidden costs, that’s somewhere between $600 million and $1.4 billion that could reach families but stays trapped in the system instead.

The question is not whether to use fintech apps. They are clearly better than the alternatives. The question is whether people understand what they pay.

Faruq still believes there are no hidden fees. Jegede knows there are. The truth sits somewhere in the exchange rate spread that nobody explains clearly.

“If you don’t know which currency pair is being applied to your transaction, you don’t know the real cost,” Jegede says. “Even if the fee is zero.”

The next time you send money home, ask your app one question. Which rate are you using for my specific transaction? Not the rate you advertise. The rate you actually apply. The answer might surprise you.

Nigeria received $20.93 billion in remittances in 2024, making it one of Africa’s largest recipients. The average cost of sending $200 to Nigeria was 7.9% in late 2023, more than double the UN’s target of 3%. Most of that cost hides in exchange rate markups rather than visible transfer fees.

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