Connect with us
Switch

Currencies

Frantic CBN allows diaspora remittances to be withdrawn in dollars and sold anywhere including black market

To save the naira, CBN now allows diaspora remittances to be withdrawn dollar cash.

Published

on

New CBN guidelines ban MMOs, PSPs, Operators from receiving diaspora remittances

The Central Bank of Nigeria (CBN) has announced the amendment of procedures for receipt of diaspora remittances in an apparent and frantic attempt to improve liquidity in the forex market and reduce the disparity between the black market and official I&E window.

This disclosure was made in a circular issued by the CBN on Monday, November 30, 2020, to all authorized dealers and the general public and signed by its Director for Trade and Exchange Department, Dr O.S. Nnaji.

What the CBN is saying

In the new amended procedure, CBN stated that beneficiaries of Diaspora Remittances through International Money Transfer Operators (IMTOs) shall henceforth receive such inflows in foreign currency (US Dollars) through the designated bank of their choice.

The CBN’s circular partly reads,

‘’In an effort to liberalize, simplify and improve the receipt and administration of diaspora remittances into Nigeria, the Central Bank of Nigeria (CBN) wishes to announce as follows;

Specta

Beneficiaries of Diaspora Remittances through International Money Transfer Operators (IMTOs) shall henceforth receive such inflows in foreign currency (US Dollars) or into their ordinary domiciliary account. Such recipients of remittances may have the option of receiving these funds in foreign currency cash (US Dollars) or into their ordinary domiciliary account.’

  • The apex bank also stated that such recipients of remittances may have the option of receiving these funds in foreign currency cash (US Dollars) or into their ordinary domiciliary account.
  • The CBN stated that 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.
  • The apex bank also points out that these changes would help finance a future stream of investment opportunities for Nigerians in the Diaspora, while also guaranteeing that recipients of remittances would receive a market-reflective exchange rate for their inflows.
  • It also urged all authorized dealers and the general public to note that beneficiaries shall have unfettered access and utilization to such foreign currency proceeds, either in cash and/or in their domiciliary accounts in line with the circular.

What this means

This new directive means when Nigerians living in diaspora transfer money to loved ones in the country, they can in turn withdraw the money in dollar cash and sell wherever they want to.

  • Currently, the exchange rate in the black market is around N500/$1 compared to N395 at the official BDC market.
  • Now, Nigerians who recieve foreign transfers such as Western Union or Moneygram can withdraw it in dollars and then sell at the black market rate or wherever they want to.
  • Currently, most Nigerians living in diaspora who transfer cash to loved ones back home do so at the parallel market exchange rate, Nairametrics can confirm.

The optics

Nairametrics believes this latest move by the CBN is aimed squarely at improving liquidity in the retail end of the foreign exchange market hoping that this will strengthen the naira at the retail end of the black market.

  • In a news interview on Arise TV, Dr. Nnaji explained that “when you have more inflows into the country at dollar value it will help bring down the BDC rates, it will also help solidify or unify the rates in the market so we don’t have multiple currency rates,” a confirmation that this is targeted at the black market.
  • A visibly pertubed and contrite Nnaji reiterated that “for now because US dollar is a currency that we have available in the banking sector, you can collect your money in US dollars” maintaining that this was the only currency that you withdraw for now.
  • She also claimed you can collect in Naira.
  • Nigeria receives an average of $5 billion per quarter in foreign remittances but suffered a sharp drop in the second quarter of 2020 when it fell to $3.38 billion.

Flashback on Dr. Nnaji

Earlier in the year, Nairametrics reported that the CBN claimed it was investigating  remittances in the diaspora between January 2016 and December 2019. Ironically, the same person who made the claim was Dr. Nnaji.  Here is what she said;

Coronation ads

“If the dollar and euro are everywhere, what happens to our currency, the Naira now is not an internationally accepted currency, if we dilute it, it will have consequences. We want our Naira to be acceptable by other West African countries; we want it to be an internationally accepted currency. 

“If we have more funds come in as remittances, our foreign reserves go up, and when that happens, the confidence in the Nigerian economy will go up. It helped in price stability and exchange rate stability management and that the apex bank was interesting in increasing Diaspora remittances,

 

 

Coronation ads

Stanbic IBTC

Chike Olisah is a graduate of accountancy with over 15 years working experience in the financial service sector. He has worked in research and marketing departments of three top commercial banks. Chike is a senior member of the Nairametrics Editorial Team. You may contact him via his email- [email protected]

8 Comments

8 Comments

  1. Concerned citizen

    November 30, 2020 at 11:57 pm

    Seems like the naira might be following Turkish lira and Lebanese pound this year in losing its value. Fiat currencies have never held their value and those that save in it lose a lot (if not all) of their wealth. Do you research on bitcoin, then get some, otherwise you risk waking up one day and finding out that your savings have lost 50% (or more) of its value overnight.

  2. udochukwu oledinma

    December 1, 2020 at 5:01 am

    Clowns and nitwit running our economy

  3. Ola

    December 1, 2020 at 9:07 pm

    Unserious people. This is a step they should have taken years ago, knowing surely that it has the capacity to reduce pressure on the naira up to 20-30 per cent.

    • Anonymous

      December 2, 2020 at 5:41 am

      Trial and error CBN governor. This was the practice b4 he brought this stupid policy.

  4. AMSTONE

    December 2, 2020 at 11:44 am

    Not too good an idea,the naira might fade out of sight and Nigerans will start spending dollars in their own country like what is happening in some parts of south America.
    The best option is for Nigerian financial institutions to shun round tripping,because those malams on the streets gets their money through financial institutions round tripping and arm twisting of vulnerable customers that they will tell the bank don’t have raw dollars,and the should go and come back or accept the naira.The only solution is to check corruption in central bank and the commercial banks,heads must roll,I just dont know how to put it,but allowing a unfettered inflow of the dollar will spell doom for the naira as a consumer nation.

  5. Osaze

    December 14, 2020 at 11:03 pm

    Dear Sir,

    I would like know if CBN rule of sending $100 per month per account is still in place.

    Regards

  6. Ufuoma Adaighofua Ojomaikre

    December 25, 2020 at 7:07 pm

    It is shameful that CBN is allowing sale in black market. Is it that the black market operators cannot be clamped down. How can professional bankers be interacting with illiterate quacks whose only prerequisite is to be connected to some big shot

  7. Michael Adu Mr

    January 12, 2021 at 11:43 pm

    Does this policy affect sending money to the UK ? From a Naira account in Nigeria could you send money to a uk bank account which is in Sterling with no capped limit

Leave a Reply

Your email address will not be published.

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Currencies

CBN frowns at continued diaspora remittances in naira, introduces sanctions

The CBN has frowned at activities of some IMTOs and unlicensed companies who continue to facilitate diaspora remittances into the country in Naira.

Published

on

diaspora remittances, Total credit to the economy rose to N19.54trillion – CBN Governor, CRR debits, P-AADS, #EndSARS: CBN says funds in frozen accounts may be linked to terrorist activities, Covid-19: Court closures impacted revenue generation for courts - Emefiele, P&ID dispute: UK Court orders $200 million guarantee to FG, Leaked letter by Poultry Farmers Association triggered CBN emergency approval to import maize, nImplications of CBN's latest devaluation and FX unification, current account deficit, IMF, COVID-19, CBN OMO ban could give stocks a much-needed boost , CBN’s N132.56 billion T-bills auction records oversubscription by 327% , Nigeria pays $1.09 billion to service external debt in 9 months , Implications of the new CBN stance on treasury bill sale to individuals, Digital technology and blockchain altering conventional banking models - Emefiele  , Increasing food prices might erase chances of CBN cutting interest rate   , Customer complaint against excess/unauthorized charges hits 1, 612 - CBN , CBN moves to reduce cassava derivatives import worth $600 million  , Invest in infrastructural development - CBN Governor admonishes investors , Credit to government declines, as Credit to private sector hits N25.8 trillion, CBN sets N10 billion minimum capital for Mortgage firms, CBN sets N10 billion minimum capital for Mortgage firms , Why you should be worried about the latest drop in external reserves, CBN, Alert: CBN issues N847.4 billion treasury bills for Q1 2020 , PMI: Nigeria’s manufacturing sector gains momentum in November, CBN warns high foreign credits could collapse Nigeria’s economy, predicts high poverty, MPC Member, BVN, Fitch, Foreign excchange (Forex), Overnight rates crash after CBN’s N1.4 trillion deduction, Nigeria’s foreign reserves hit $36.57 billion; Emefiele keeps his word on defending the naira, CBN to support maize farmers, projects 12.5 million metric tons in 18 months, BREAKING: CBN Upscales Greenwich Trust Limited, grants it's operational license for merchant banking, AGSMEIS: CBN expand beneficiaries to 14,638., CBN expands access to mortgage financing

The Central Bank of Nigeria (CBN) has frowned at activities of some International Money Transfer Operators (IMTOs) and unlicensed companies who continue to facilitate diaspora remittances into the country in Naira.

The apex bank’s reaction follows the contravention of its earlier directive that all diaspora remittances must be paid to the beneficiaries in dollars.

This disclosure was contained in a circular titled, ‘Modalities for Payout of Diaspora Remittances’, issued by the CBN on Friday, January 22, 2021, and signed by its Director Trade and Exchange Department, Dr O.S. Nnaji.

READ: CBN revokes licenses of 7 Payment Service Providers

What the CBN is saying

The CBN in its circular said, ‘’Further to our circular titled ‘Receipt of Diaspora Remittances: Additional Operational Guidelines’, it has come to our notice that some IMTOs and unlicensed companies continue to facilitate diaspora remittances into the country in Naira, “in clear contravention of the Central Bank of Nigeria directive that all remittances be paid to beneficiaries in dollars.’’

Specta

READ: More pressure on the naira as Diaspora remittances to drop by 20%

For the avoidance of doubt, the Central Bank of Nigeria further clarifies as follows;

  1. Only licensed IMTOs are permitted to carry on the business of facilitating diaspora remittances into Nigeria;
  2. All diaspora remittances must be received by beneficiaries in foreign currency only (cash and /or transfers to domiciliary accounts or recipients);
  3. IMTOs are not permitted, under any circumstances, to disburse diaspora remittances in Naira (either in cash or by electronic transfers), be it through remittance settlement accounts (which had been earlier directed to be closed), third party accounts or via any other payment platforms within and/or around the Nigerian financial system.’’

READ: Nigeria’s forex devaluation timeline – 2020

The apex bank in the circular said that the measures were intended to promote transparency, grow diaspora remittances and significantly improve foreign exchange inflows into Nigeria.

Coronation ads

The CBN warned that strict sanctions, including withdrawal of operating licenses, shall be imposed on any individuals and/or institutions found to be aiding, abetting or directly contravening these guidelines.

It went further to say that it shall not hesitate to authorize the closure of the accounts of unlicensed operators in Nigerian banks, including being barred from accessing banking services in Nigeria.

It promised continued monitoring of developments in this regard, adding that it would also issue further guidance as appropriate.

READ: Continuous increase in inflation rate may weaken economy – CBN report

Coronation ads

What this means

With the insistence of the apex bank on its earlier directive, it means that Nigerians living in the diaspora can transfer foreign currency to their relatives and loved ones in the country, who in turn will withdraw the money in dollar cash and sell anywhere they so desire.

Stanbic IBTC

It means they can for instance receive foreign transfers such as Western Union or Moneygram, withdraw it in dollars and then sell at the black market rate or anywhere else they want to. This they believe will help to stabilize the exchange rate and discourage hoarding.

READ: UBS warns Bitcoins could disappear like Myspace

Jaiz bank ads

What you should know

  • It can be recalled that the CBN, had in November 2020, amended the procedure for the receipt of diaspora remittances and insisted that it must be paid in dollars to the beneficiaries, in an apparent and frantic attempt to improve liquidity in the forex market and reduce the disparity between the black market and the official window.
  • Also in an additional guideline for diaspora remittances, the CBN barred IMTOs from sending money to Mobile Money Operators and also stopped the integration of payment services providers to IMTO accounts. It also stopped switches and processors from getting involved in foreign remittances.

Continue Reading

Currencies

Naira gains marginally at NAFEX window, exchange rate to remain stable

The exchange rate between the naira and the dollar appreciated closing at N394/$1 at the NAFEX window.

Published

on

Dollar, Exchange rate, FOREX, NAFEX market turnover drop by 59%, Naira crashes to N470/$1 as currency uncertainty worsens 

On January 21, 2021, the exchange rate between the naira and the dollar appreciated closing at N394/$1 at the NAFEX (I&E Window) where forex is traded officially.

However, during intraday trading, the exchange rate traded for as high as N415.76/$1, sustaining yesterday’s figure which is the highest intraday trading tracked by Nairametrics. Forex turnover, however, dropped by about 14% as pressure on the foreign exchange market continues.

READ: Naira stabilizes at black market as external reserve rises by $515 million in 12 days

According to a report from Reuters, the naira is expected to remain stable in the coming week as currency traders watch for policy details at CBN’s first MPC meeting in 2021.

Also, the exchange rate at the black market where forex traded unofficially still remained flat at N475/$1. The exchange rate at the parallel market closed at N475/$1 on the previous trading day of January 20, 2021.

Specta

The exchange rate disparity between the parallel market and the official market is about N81, representing a 17% devaluation differential.

READ: Naira strengthens at NAFEX window despite 38% drop in dollar supply

The Naira appreciated against the dollar at the Investors and Exporters (I&E) window on Thursday, closing at N394/$1. This represents a 17 kobo gain when compared to the N394.17/$1 that it closed on the previous trading day.

  • The opening indicative rate was N394.16 to a dollar on Thursday, the same rate that was recorded on Tuesday, January 20, 2021.
  • The N415.76 to a dollar was the highest rate during intra-day trading before it closed at N394 to a dollar. It also sold for as low as N390/$1 during intra-day trading.
  • Forex turnover at the Investor and Exporters (I&E) window dropped by 13.9% on Thursday, January 21, 2021.
  • According to the data tracked by Nairametrics from FMDQ, forex turnover declined from $89.50 million on Wednesday, January 20, 2021, to $77.04 million on Thursday, January 21, 2021.
  • The exchange rate is still being affected by low oil prices, dollar scarcity, a backlog of forex demand, and a shaky economy that has been hit by the coronavirus pandemic.
  • There are fears that the exchange rate at the black market might be under pressure in the coming weeks as importers scramble for dollars to meet their demands.

READ: The dangling fate of indigenous oil upstream operators

Coronation ads

Oil price steady rise

Brent crude oil price is at about $56 per barrel on Wednesday, as it moves towards the $60 mark, a strong sign that global demand could sustain price increases in 2021.

  • This appears as a boost to Nigeria as the country’s crude oil price benchmark for 2020 was $40 while it projected an oil production output of 1.8 million barrels per day.
  • Nigeria has a production capacity of 2.5 million barrels per day but is subject to OPEC’s crude oil production cuts, which are expected to help sustain higher oil prices.
  • The higher oil prices and steady production output have positively impacted Nigeria’s external reserves, rising sharply to $36.304 million according to central bank data dated January 14, 2020.
  • This is the highest level since July 2020 and a sign that higher oil prices and steady output levels may be contributing significantly to Nigeria’s foreign exchange position.

READ: Nigeria faces prolonged exchange rate crisis as oil prices remain stuck at $40

Nigeria rising external reserves

  • The external reserve has risen to $36.464 billion as of January 19, 2021.
  • Nairametrics reported on Wednesday that the government may have taken receipt of the $1-1.5 billion World Bank Loan.
  • The external reserves have increased by $1.09 billion since December 31, 2020, when it closed the year at $35.3 billion.
  • Nigeria also needs the external reserves to hit $40 billion if it is to adequately meet some of the pent up demand that has piled up since 2020 when oil prices crashed and the pandemic caused major economic lockdowns.

Continue Reading

Currencies

Official (NAFEX) Exchange rate hits N415/$1 during Intra-day trading

The exchange rate at NAFEX trades at N415/$1 during Intra-day trading NAFEX as forex turnover rises by 233% rise

Published

on

Naira falls across forex markets as businesses resume after public holidays

On January 20, 2021, the exchange rate between the naira and the dollar depreciated closing at N394.17/$1 at the NAFEX (I&E Window) where forex is traded officially.

However, during intraday trading, the exchange rate traded for as high as N415.76/$1 the highest intraday trading tracked by Nairametrics. Forex turnover also rose significantly by 233.6% as demand puts pressure on the foreign exchange market.

On the flip side, the exchange rate at the black market where forex traded unofficially still remained stable at N475/$1. The exchange rate at the parallel market closed at N475/$1 on the previous trading day of January 19, 2021.

READ: Naira strengthens at NAFEX window despite 61% drop in dollar supply

The exchange rate disparity between the parallel market and the official market is about N80.83, representing a 17% devaluation differential.

Specta

The Naira depreciated against the dollar at the Investors and Exporters (I&E) window on Wednesday, closing at N394.17/$1. This represents an 82 kobo gain when compared to the N393.35/$1 that it closed on the previous trading day.

READ: FIRS hits 98% of target as it collects N4.95 trillion for 2020 fiscal year

  • The opening indicative rate was N394.17 to a dollar on Wednesday, representing a 21 kobo drop when compared to the N393.96 that was recorded on Tuesday, January 19, 2021.
  • The N415.76 to a dollar was the highest rate during intra-day trading before it closed at N394.17 to a dollar. It also sold for as low as N390/$1 during intra-day trading.
  • Forex turnover at the Investor and Exporters (I&E) window increased significantly by 233.6% on Wednesday, January 20, 2021.
  • According to the data tracked by Nairametrics from FMDQ, forex turnover rose from $26.83 million on Tuesday, January 19, 2021, to $89.50 million on Wednesday, January 20, 2021.
  • The average daily forex sale for last week was about $169.93 million, which represents a huge increase from the $34.5 million that was recorded the previous week.
  • The exchange rate is still being affected by low oil prices, dollar scarcity, a backlog of forex demand, and a shaky economy that has been hit by the coronavirus pandemic.
  • There are fears that the exchange rate at the black market might be under pressure in the coming weeks as importers scramble for dollars to meet their demands.

READ: Naira falls at black market despite over 100% improvement in dollar supply

Oil price steady rise

Brent crude oil price is at about $56 per barrel on Wednesday, as it moves towards the $60 mark, a strong sign that global demand could sustain price increases in 2021.

Coronation ads
  • This appears as a boost to Nigeria as the country’s crude oil price benchmark for 2020 was $40 while it projected an oil production output of 1.8 million barrels per day.
  • Nigeria has a production capacity of 2.5 million barrels per day but is subject to OPEC’s crude oil production cuts, which are expected to help sustain higher oil prices.
  • The higher oil prices and steady production output have positively impacted Nigeria’s external reserves, rising sharply to $36.304 million according to central bank data dated January 14, 2020.
  • This is the highest level since July 2020 and a sign that higher oil prices and steady output levels may be contributing significantly to Nigeria’s foreign exchange position.

READ: Naira falls at NAFEX window despite 56.6% improvement in dollar supply

Nigeria rising external reserves

  • The external reserve has risen to $36.464 billion as of January 19, 2021.
  • Nairametrics reported on Wednesday that the government may have taken receipt of the $1-1.5 billion World Bank Loan.
  • The external reserves have increased by $1.09 billion since December 31, 2020, when it closed the year at $35.3 billion.
  • Nigeria also needs the external reserves to hit $40 billion if it is to adequately meet some of the pent up demand that has piled up since 2020 when oil prices crashed and the pandemic caused major economic lockdowns.

Continue Reading
Advertisement




Advertisement