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Frantic CBN allows diaspora remittances to be withdrawn in dollars and sold anywhere including black market

To save the naira, CBN now allows diaspora remittances to be withdrawn dollar cash.

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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;

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.

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  • 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;

“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,

 

 

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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]

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    Currencies

    Exchange rate strengthens at NAFEX as dollar supply spikes by 690%

    Naira gained against the US Dollar on Thursday to close at N409.65/$1 while dollar supply surges by 690.6%.

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    Naira stabilizes at black market as CBN continues its intervention in forex market

    Thursday, 8th April 2021: The exchange rate between Naira and the US Dollar closed at N409.65/1$ in the Importers and Exporters window, where forex is traded officially.

    Naira gained against the US Dollar on Thursday to close at N409.65/$1. This represents a 0.33% appreciation compared to N411/$1 recorded on Wednesday.

    Meanwhile, naira remained stable in the parallel market on Thursday, 8th April 2021 to close at N485 to a dollar, the same rate as maintained since last week.

    READ: Naira falls at NAFEX window despite 394% increase in dollar supply

    Trading at the official NAFEX window

    Naira appreciated against the US Dollar at the Investors and Exporters window on Thursday to close at N409.65 to a dollar. This represents a N1.35k gain when compared to N4111/$1 recorded on Wednesday, 7th April 2021.

    • The opening indicative rate closed at N410.5 to a dollar on Thursday. This represents a N0.76 depreciation when compared to N409.74/$1 recorded on Wednesday.
    • Also, an exchange rate of N419 to a dollar was the highest rate recorded during intra-day trading before it closed at N409.65/$1. It also sold for as low as N394/$1 during intra-day trading.
    • Forex turnover at the Investor and Exporters (I&E) window increased by 690.6% on Thursday, 8th April 2021.
    • A cursory look at the data tracked by Nairametrics from FMDQ showed that forex turnover grew from $11.85 million recorded on Wednesday, April 7, 2021, to $93.69 million on Thursday, April 8, 2021.

    Cryptocurrency watch

    The world’s most popular digital currency, bitcoin recorded a 0.18% decline in value in the early hours of Friday, 9th April 2021.

    • Bitcoin was down by 0.18% to trade at $58,135 on Friday morning, bur lead compared to $36,199 recorded at the close of trade on Wednesday.
    • Meanwhile, according to a research report, bitcoin is expected to surge around 600$ to hit the $400,000 level in 2021. This has been well met as major financial institutions in the world such as Visa, Goldman Sachs, and Morgan Stanley have embraced the digitalization of money.
    • The digital currency has been widely adopted by many, replacing gold as the global digital-reserver asset.

    READ: Naira remains flat as external reserve fall to just 6 months of imports

    Oil price gain

    Brent crude oil price recorded a marginal increase on Thursday as it closed at $63.2 per barrel, indicating a 0.06% gain compared to $63.16 recorded at the close of trade on Wednesday.

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    • Crude oil prices are beginning to record tepid growth demands are expected to increase due to revived optimism in the market as the United Kingdom has given the first vaccine to about half of its population, while the US has vaccinated about 30% of its population.
    • Crude oil prices have recorded a marginal increase during the week despite the resolve of the OPEC+ to reduce production cuts in the coming months. However, US Shale Giant have commended the OPEC+ group in bringing supply and demand back to balance.
    • Brent Crude closed at $63.2 (+0.06%), WTI Crude closed at $59.75 indicating 0.25% gain, Bonny Light, $60.6 (-2.63%), OPEC Basket (-1.06%) to close at $60.68 while Natural gas dipped by 0.12% to close at $2.519.

    External reserve

    Nigeria’s external reserve gained $1.79 million on Thursday, 8th April 2021 to close at $34.977 billion, being the highest external reserve position recorded in over a month.

    • This indicates a 0.01% increase when compared to $34.975 billion recorded on Thursday 1st April 2021.
    • This also represents an increase in the country’s external reserve position for the 12th consecutive day, having endured a significant downturn in the early parts of the year. Nigeria’s reserve has added a total of $560.5 million in 12 days.
    • This recent increase in Nigeria’s external reserve could however be attributed to the increase in crude oil prices recorded earlier in March before the recent bearish trade in the crude market.
    • It could be attributed to the possible increase in diaspora remittance as the CBN offers incentives for every unit of dollar received in Nigeria from diaspora remittance.

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    Currencies

    Exchange rate weakens to record N438/$1 during intra-day trading

    The exchange rate at NAFEX trades at N438/$1 during Intra-day trading NAFEX as forex turnover drops by 71%

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    Forex, Nafex, parallel market, exchange rate, Naira, Dollar

    Wednesday, 7th April 2021: The exchange rate between the naira and the US Dollar closed N411/$ at the Investors and Exporters window.

    The Naira depreciated against the US Dollar for the third time in a row on Wednesday, 7th of April 2021, to close at N411/$1. This represents a 0.12% decline when compared to N410.5 recorded on Tuesday.

    Despite the depreciation recorded in the I&E window, the naira remained stable in the parallel market on Wednesday to close at N485 to a dollar, the same as recorded since last week.

    Meanwhile, the dollar supply in the official exchange market dropped to its lowest in over 5 months as it declined by 71% on Wednesday to stand at $11.85 million.

    READ: Naira gains at NAFEX window despite 26.2% drop in dollar supply


    Trading at the official NAFEX window

    Naira depreciated against the US Dollar at the Investors and Exporters window on Wednesday to close at N411 to a dollar. This represents a 50 kobo decline when compared to N410.5/$1 recorded on Tuesday, 6th April 2021.

    • The opening indicative rate closed at N409.74 to a dollar on Wednesday. This represents a N0.26 depreciation when compared to N409.48/$1 recorded on Tuesday.
    • Also, an exchange rate of N438 to a dollar was the highest rate recorded during intra-day trading before it closed at N411/$1. It also sold for as low as N405/$1 during intra-day trading.
    • Forex turnover at the Investor and Exporters (I&E) window dropped by 71% on Wednesday, 6th April 2021.
    • A cursory look at the data tracked by Nairametrics from FMDQ showed that forex turnover declined from $40.8 million recorded on Tuesday, April 6, 2021, to $11.85 million on Wednesday, April 7, 2021.

    READ: Naira gains at NAFEX window despite 26.2% drop in dollar supply


    Cryptocurrency watch

    Major crypto assets recorded a significant drop in Wednesday’s trade as the world’s most popular crypto asset, Bitcoin slumped by 3.13%, losing about $1,818.66 in a single day’s trade.

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    • Bitcoin fell by 3.13% as of 11:00 pm on Wednesday to trade at $56,199.64
    • Also, Ethereum lost 5.56% to trade at $1,995.18, hence losing a total of $117.51.
    • Meanwhile, Nairametrics reported that the court has granted Ripple access to U.S SEC documents expressing the financial regulator’s interpretation or views about crypto assets. This saw the asset rallied in the early hours of the say.

    Oil price gain marginally

    Crude oil prices recorded a marginal gain on Wednesday to close at $63.09 (Brent Crude), representing a 0.56% gain.

    • The marginal growth in the price of crude could be attributed to the revived optimism in the market as the United Kingdom has given the first vaccine to about half of its population, while the US has vaccinated about 30% of its population.
    • Crude prices grew despite extended lockdowns in major countries in Europe as they battle with the third wave of the pandemic.
    • Brent Crude closed at $63.09 (+0.56%), WTI Crude closed at $59.77 indicating 0.74% gain, Bonny Light, $62.24 (+1.14%), OPEC Basket (-0.6%) to close at $61.33 while Natural gas grew by 2.61% to close at $2.52.

    External reserve

    Nigeria’s external reserve gained $129.8 million on Tuesday, 6th April 2021 to close at $34.98 billion, the highest single-day gain recorded in about 3 months.

    • This indicates a 0.37% increase when compared to $34.85 billion recorded on Thursday 1st April 2021.
    • This also represents the 11th consecutive increase in the country’s external reserve position having endured a significant downturn in the early parts of the year. Nigeria’s reserve has added a total of $558.8 million in 11 days.
    • This recent growth could however be attributed to the increase in crude oil prices recorded earlier in March and the possible increase in diaspora remittance as the CBN offers incentives for every unit of dollar received from diaspora remittance.
    • Nigeria will now hope for the reserve to $40 billion so as to be able to meet up with pent-up demand that had accumulated since the crash of crude oil price in 2020.

     

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