By Omodele Adigun
Better days are here for the recipients of remittance transfer as they can now receive their wired bucks instantly in hard currencies, a clean break from the past of getting paid in Naira.
All thanks to the new policy of the Central Bank of Nigeria (CBN) that allows beneficiaries unfettered access to their forex inflows either in cash or as deposit in their domiciliary accounts.
The new policy stipulates that beneficiaries of diaspora remittances through the International Monetary Transfer Operators (IMTO) shall now have such inflows in foreign currency (US dollar) through the designated bank of their choice.
A circular by Dr Ozoemena Nnaji, the Director of Trade & Exchange Department of the apex bank, states that recipients of such remittances may have the option of receiving such funds in the foreign currency cash or into their domiciliary account.
To encourage Nigerians to embrace the new initiative, he added: These “changes are necessary to deepen the foreign exchange market, provide more liquidity and create more transparency in the administration of Diaspora remittances into Nigeria. In addition, these changes would help finance a future stream of investment opportunities for Nigerians in the Diaspora, while also guaranteeing that recipients would receive a market reflective exchange rate for the market”.
Things can’t get better than this as the beneficiaries, in the words of Mr Boss Mustapha, the Secretary to the Government of the Federation (SGF), can now utilise “these monies … as social security funds to families (school fees, feeding allowance, hospital bills and so on),” or invest some of them “in housing and estate development, hospital projects, schools and commercial enterprises.”
Aside this, with many Nigerians resident in such countries as the United Kingdom, the United States, and Europe, to mention just few, and “given the estimated annual remittance of close to $24billion, which could help in improving our balance of payment position, reduce our dependence on external borrowing and mitigate the impact of COVID-19 on foreign exchange(forex) inflows into the country, the CBN has sought to find ways to support improved remittance inflows into the country through official channels”, said Mr. Godwin Emefiele, the CBN Governor, while giving reasons for the intervention in order to improve the external capital Inflows into the country.
Remittances, the repatriated earnings of emigrant workers, are important sources of forex for many countries around the World, particularly the developing nations, including Nigeria. For instance, experts are of the view that remittances can ease the credit constraints of the unbanked households in poor rural areas, facilitate asset accumulation and business investments, promote financial literacy, and reduce poverty. They also affirm that these monetary inflows prove considerably less volatile and more reliable than other sources of external capital flows such as Foreign Direct Investments (FDIs) and official development aid.
Globally, in 2016, according to World Bank Report, people living abroad sent an estimated $574 billion back to their home countries. And just before the onset of COVID 19, remittances to low- and middle-income countries (LMICs) reached a record US$ 554 billion in 2019, overtaking FDIs. In 2019, the top five remittance recipient countries were India ($83.1 billion), China ($68.4 billion), Mexico ($38.5 billion), the Philippines ($35.2 billion), and the Arab Republic of Egypt ($26.8 billion).
To show that remittances have the potential to lift up developing economies, the World Bank lists top five countries in which remittances contributed significantly to their Gross Domestic Product (GDP) in 2019. They are Tonga (37.6 per cent of GDP), Haiti (37.1 per cent), South Sudan (34.1 per cent), the Kyrgyz Republic (29.2 per cent), and Tajikistan (28.2 per cent)
As for Nigeria, “the estimated annual remittance inflow of close to $24billion” mentioned by Emefiele was expatiated by the SGF in his remark at the July 2019 National Diaspora Day celebration where he said the remittances received from Nigerians stood at $19.6 billion, $22 billion and $25 billion in 2016, 2017 and 2018 respectively. As for 2019, data from Centre for the Study of the Economies of Africa show that the total direct remittance inflow into Nigeria stood at US$23 billion, making the country the highest recipient within the sub-Saharan African region. And between January and February 2020, the Centre explains that Nigeria recorded US$1.01 billion remittance inflow, although lower than the $2.04 billion recorded the same period in 2019 due to the severe impact of COVID-19.
“Based on this premise,” stated Emefiele, while still justifying the intervention, “we analyzed data on IMTO inflows into the country over the past year, and, through our investigations, discovered that some IMTOs, rather than compete on improving transaction volumes and create more efficient ways for Nigerians in the Diaspora to remit funds, resorted to engaging in arbitrage arrangements on the naira-dollar exchange rate, which to a large extent resulted in a significant drop in flows into the country. It also encouraged the use of unsafe unofficial channels, which also supported diversion of remittance flows meant for Nigeria, thereby undermining our Foreign Exchange management framework.
As a result, in an effort to boost remittance inflows and foster an environment that would enable faster, cheaper, and more convenient flow of remittances back to Nigeria,the Central Bank of Nigeria, on November 30, 2020, announced a new policy initiative, which would help to support these objectives.”