Currencies
CBN Governor discloses why they amended procedures for receipt of diaspora remittances
The CBN Governor has disclosed the reason the apex bank amended the procedures for receipt of diaspora remittances into the country.
The Central Bank Governor, Godwin Emefiele, has hinted the reason the apex bank amended the procedures for receipt of diaspora remittances into the country, as it sought to review the operations of International Money Transfer Operators (IMTO) in the country.
This disclosure was contained as part of the remark by Emefiele, during a briefing on improving remittance inflows into Nigeria, on Thursday, December 3, 2020.
READ: CBN Governor says Nigeria’s external reserves sufficient to cover 7-months import
Emefiele revealed that based on analysis after investigation, the CBN discovered that some IMTOs, rather than compete on improving transaction volumes and creating more efficient ways for Nigerians in the diaspora to remit funds, resorted to engaging in arbitrage arrangements on the naira-dollar exchange rate.
He said that this resulted in a significant drop in inflows into the country and also encouraged the use of unsafe unofficial channels, which also supported diversion of remittance flows meant for Nigeria, thereby undermining the country’s foreign exchange management framework.
READ: CBN expects $24bn annual diaspora remittances – Emefiele
What they are saying
The CBN Governor in his statement said:
“Given the estimated annual remittance inflow of close to $24 billion, 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 inflows into the country, the CBN sought to find ways to support improved remittance inflows into the country through official channels.
READ: Nigeria receives $17.5 billion diaspora remittances in 2019
“Based on this premise, 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 inflows 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,’’ he added.
READ: CBN condemns receiving foreign currency in transfers
Emefiele noted that due to scarcity of dollar cash, some of the remittance operators in collaboration with commercial banks decided to remit funds to recipients in naira, at an agreed exchange rate between the banks and the IMTOs.
What you should know: it can be recalled that on November 30, the CBN announced an amendment to the procedure for receipt of diaspora remittances in an effort to boost remittance inflow, liberalize, simplify and improve the receipt and administration of diaspora remittances into Nigeria.
Some of the highlights of the policy initiative include;
- Beneficiaries of diaspora remittances through IMTO shall henceforth receive such inflows in foreign currency (US Dollars) through the designated bank of their choice.
- 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 is of the opinion that in a bid to create arbitrage in those foreign exchange transactions, the IMTOs and the commercial banks shortchange the senders and beneficiaries of these funds by paying the recipients in naira at the lower exchange rate and selling at much higher rates.
This encouraged the senders and beneficiaries, who, while seeking more market reflective rates, sought the use of unofficial and illegal sources which further exacerbated the foreign exchange crisis.
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Business
CBN assures exporters of unhindered access to their dollar earnings
The CBN has given assurances to exporters that they will continue to have unfettered access to their export proceeds.
The Central Bank of Nigeria (CBN) has given assurances to exporters that they will continue to have unfettered access to their export proceeds.
This is believed to be part of the monetary control measure by the apex bank to ensure more dollar inflow and maintain forex liquidity.
This disclosure was made by the Governor of CBN, Mr Godwin Emefiele, during a virtual presentation at Zenith Bank’s 2021 Export Seminar, on Thursday, April 20, 2021.
Emefiele, however, in his statement, urged the exporters to reciprocate the good gestures of the central bank by repatriating their funds back to the country.
He said that supporting greater trade within Africa and the global community is vital to the CBN’s objectives of enabling greater economic growth and creating employment opportunities for the country’s growing population.
Emefiele said there is a strong push for the diversification of the Nigerian economy as the coronavirus outbreak has impacted negatively on global oil prices in 2020, which led to a huge drop in the country’s foreign exchange earnings and government revenue.
The CBN boss was optimistic that the African Continental Free Trade Agreement (AFCFTA) will provide opportunities for the Nigerian private sector to expand into new markets and seek new export opportunities, particularly in the area of manufacturing, ICT, agriculture and financial services.
He stated that the full implementation of AFCFTA would give Nigerian firms preferential access to markets in Africa with a value of about $504.17 billion in goods and $162 billion in services.
What you should know
It can be recalled that the CBN had introduced several measures to encourage the inflow of forex into the country following the sharp drop in oil revenue.
Some of those measures include the Naira 4 Dollar Scheme, an initiative aimed at giving incentives to senders and recipients of international money transfer in order to attract more diaspora remittances through official channels
The CBN had in January 2021, announced that all Nigerian exporters who are yet to repatriate their export proceeds, will be barred from banking services effective from January 31, 2021.
Why this matters
The CBN believes that repatriating these export proceeds via the NAFEX (Investor and Exporter) window will improve liquidity in the official market and perhaps strengthen the naira at the black market.
Most of the exporters sell their forex to the parallel market where it can be exchanged for higher naira value-boosting their gains on foreign currency conversions.
However, it is yet to be seen if exporters will comply with this directive or seek other means of avoiding the hammer on them. Most exporters already find a way to avoid these hammers by opening foreign bank accounts where most of the export proceeds are warehoused and then sold at the black market.
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