“Making Bureaux De Change (BDCs) one of the channels through which over $25 billion annual Diaspora remittances enter the economy will give depth to the foreign exchange (forex ) market and boost their perations”, says a financial market expert.
The above advice is apt when one considers the fact that the BDCs have long been supporting Nigeria’s growth agenda and Central Bank of Nigeria’s commitment to forex rate stability. This should ordinarily make them qualify as remittance transfer providers, traditionally called Money Transfer Operators (MTOs).
The MTOs are ‘financial companies (but usually not banks) engaged in cross border transfer of funds, using either their internal system or access to another cross-border banking network’
The umbrella body of the forex traders, the Association of Bureaux De Change Operators of Nigeria (ABCON), believes that the success of its members goes beyond favourable rates but access to multiple streams of forex to deepen the market, keep the naira stable and boost their operations.
Going by the unpredicability of crude oil prices , it is good advice that Nigeria should cultivate multiple streams of forex earnings. The enlisting of more channels to attract Diaspora remittances and other foreign capital will not only deepen the forex market but keep the Naira stable.
Diaspora remittances to Nigeria in 2018 was put at $25 billion.This remains a reliable source of forex to the domestic economy, which is why the over 4,500 CBN-licensed BDCs come to mind. Concerned with the stagnant economy marred with inconsistent forex earnings, ABCON has long been calling for its members to be one of the channels for receiving Diaspora remittances into the economy.
Its President, Aminu Gwadabe, said the apex bank’s forex policy has brought stability to the BDC industry and helped operators to embrace automation which is the standard best practice globally, adding the BDCs to one of the channels through which the Diaspora remittance funds come into the country will be a good way to reduce the reliance of rate differentials to sustain operators’ businesses.
He said that the BDCs remain at the centre of economic development and have the capacity to attract needed capital for the development of the economy. Findings have even shown that forex remittances from Nigerians offshore far exceeded the country’s earnings from crude oil export last year.
Since many transactions are unrecorded or take place through informal channels, the actual amount of remittance flows into the country is arguably higher. The estimation is that migrant remittances to Nigeria could grow to $25.5 billion, $29.8 billion and $34.8 billion in 2019, 2021 and 2023 respectively.
For instance, that the total oil earnings of the nation stood at $15 billion in 2018, while the total remittance from Nigerians abroad amounted to $25 billion in the same year. Commenting on the fact that data at the apex bank show that the country grossed N5.54 trillion ($15.4billion) from oil revenue in the outgoing year, compared with $25 billion remittance from Nigerians abroad, Gwadabe said: “Diaspora remittances contribute to this economy more than what the oil sector is yielding. The Nigeria National Petroleum Corporation (NNPC) inflow in 2018 is about $15 billion while migrant remittances, Diaspora remittances, are nothing less than $25 billion annually into this country’s economy, and this inflow is steady and adds to the country’s Gross Domestic Product (GDP)”.
According to him, Diaspora remittances remain cheap source of fund, because it is not to be paid back with interest but goes directly into building homes, payment of school fees, medicals and a lot of things that are adding value to the weak economy. The ABCON chief explained that Diaspora remittances represent household income from foreign economies arising mainly from the temporary or permanent movement of people to those economies. The remittances cash and non-cash items that flow through formal channels such as electronic wire, or through informal channels, such as money or goods carried across borders adding that Nigeria can cover a large part of capital flow gaps through remittances from its citizens in diaspora using the BDCs.
“Nigerian BDCs operators have also identified with the immense opportunities presented by Diaspora remittances and want to play greater role in attracting more foreign capital into the economy. Reason being that remittances are known to help poorer recipients meet basic needs, fund cash and non-cash investments, finance education, foster new businesses, service debt and essentially, drive economic growth,” Gwadabe said.
He said that Nigerian BDCs, like their counterparts in other emerging or developing economies, have what it takes to deepen the forex market through remittances and collections.
“When that happens, it will not be the first time that BDCs were given the opportunity to turn the remittances market around for good. In India, the BDCs generate over $30 billion from the Diaspora remittances. In United Arab Emirates, the entire banking needs of banks are met by the BDCs. The working of the Lebanon economy is highly dependent on the activities of BDCs in that country. Therefore, Nigeria can also achieve higher revenue through BDCs given the opportunities we seen in the remittances market,” he said. He regretted that the cost of sending money from the Diaspora to Africa is rising. In the first quarter of 2018, the average cost of sending $200 was 7.1 per cent, and remittance services in Sub-Saharan Africa were the costliest in the world at an average cost of 9.4 per cent.
He insisted that renegotiating exclusive partnerships and letting new players operate through national post offices, banks, BDCs, and telecommunications companies will increase competition and lower remittance prices.