The Central Bank of Nigeria (CBN) has issued a new directive preventing hundreds of remittance companies from operating in the country in a bid to cut down on the number of unlicensed firms.

Only three companies – Western Union, MoneyGram and Ria - are at this point able to money transfer operations, with other companies at least for now locked out of a market that sees Nigerians in the diaspora send more than US$20 billion home annually.

The CBN has been issuing warnings about unlicensed operators for some time, with a number of companies allegedly not licensed to operate in Nigeria. International money transfer company WorldRemit, which sends more than 40,000 money transfers to Nigeria every month and operates via partnerships with licensed local correspondents in the country, has criticised the move as "draconian".

"WorldRemit, in common with all other international MTOs, has been instructed by its local correspondents that transfers to Nigeria will no longer be processed and is, accordingly, suspending services immediately," the company said in a statement.

"This move is arbitrary, inexplicable and hugely detrimental to the Nigerian diaspora who rely on hundreds of money transfer companies and banks, providing them with choice, convenience and competitive pricing," said WorldRemit founder and chief executive officer (CEO) Ismail Ahmed.

"Even now, as we suspend our service, there is no clarity on why this sudden change has happened. If it is on the basis of new rules, there was no warning. If it is a re-interpretation of old rules, local correspondent networks and banks should have been forewarned."

It signals a change in tack from the Nigerian authorities, after the CBN has previously banned Western Union's exclusivity agreements on the basis they had created a near-monopolistic position in the international money transfer market. Western Union is now one of only three companies able to continue operating after the directive.

WorldRemit also raised concerns about a 2015 CBN memorandum which set out minimum requirements for companies offering international mobile money transfer services to Nigeria. The guidelines say any company offering such services must have minimum net assets of US$1 billion and have been operating for more than 10 years, thereby excluding newer yet popular companies like WorldRemit, which had been planning to launch remittances to mobile money services in Nigeria.

"It looks like all systems in Nigeria are currently geared against encouraging new entrants and competition in the mobile remittance markets. That is worrying in the extreme," Ahmed said.

Nigerians took to popular local social media platform Nairaland to express their discontent with the move.

"How will I send money to my parents for upkeep? This has to be a joke," one user posted.

"For a nation whose national currency is struggling against other national tenders and where remittances contributed US$21 billion inflows in 2015, I don't see the wisdom in banning/blocking remittances even for a second," said another.