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.
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.
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.
“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.
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.