Currencies
CBN issues modalities for payout of diaspora remittances in dollars
The new circular explains who diaspora remittances are to be paid to beneficiaries in Nigeria only in foreign currency and not naira.
The Central Bank of Nigeria (CBN) has issued a circular setting out the Modalities for Payout of Diaspora Remittances.
The apex bank 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 instead of dollars.
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.
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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.’’
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;
- Only licensed IMTOs are permitted to carry on the business of facilitating diaspora remittances into Nigeria;
- All diaspora remittances must be received by beneficiaries in foreign currency only (cash and /or transfers to domiciliary accounts or recipients);
- 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.’’
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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.
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
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 it anywhere they so desire in exchange for naira.
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.
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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.
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In a series of tweets on the evening of the 6th of March, the Twitter handle of the Central Bank of Nigeria explained why it offered the Naira4Dollar Scheme in favour of diaspora Nigerians who are seeking to inflow money into Nigeria.
We had a fair look at the tweets that we have annotated for our readers. Here it goes.
1. Consistent with the global trend, Nigeria aspires to ensure that remittance flows and diaspora investments become a significant source of external financing.
What this means: The CBN is essentially admitting that foreign remittances (from Nigerians abroad) is important to boosting dollar liquidity.
READ: CBN issues modalities for payout of diaspora remittances in dollars
2. In an effort to reduce the cost burden of remitting funds to Nigeria by working Nigerians in the Diaspora, the #CBN has introduced a rebate of N5 for every $1 of fund remitted to Nigeria, through IMTOs licensed by the CBN. The Scheme will take effect on the 8th of March 2021.
What this means: The target of the CBN are Nigerians in the diaspora who they want to offer N5 for every $1 remitted to Nigeria. While the target is diaspora remittances, the people who will benefit are their family, friends, or loved ones who withdraw the money from the bank.
3. We believe this new measure will help to make the process of sending remittances through formal bank channels cheaper and more convenient for Nigerians in the diaspora. #Emefiele
What this means: They opine that sending remittances through Nigerian banks ends up being cheaper and convenient. In reality, they appear to be targeting other channels of remitting money to Nigerians. For example, rather than pay excess transfer charges, you transfer the money through a Nigerian bank and then get an extra N5 for each dollar. However, they will have to contend with thousands of Nigerians who simply embark on peer-to-peer exchanges. Nigerians who live in the US or Canada often prefer to sell the dollars to Nigerian living in Nigeria but who need dollars abroad.
READ: The Nigerian economy is increasingly dollarized but there is a way-out
4. New FX policy will create an easier, more flexible, and more transparent, system of remittance administration, it will greatly enhance the benefits of diaspora remittances in supporting investments and growth in Nigeria. #Emefiele
What this means: This is essentially a promo pitch. It is all about competing for your remittances. They want you to route through the bank rather than the black market.
5. Policy on the administration of remittance flows is aimed at increasing the transparency of remittance inflows, reducing rent-seeking activities, and providing Nigerians in the diaspora with cheaper and more convenient ways of sending remittances to Nigeria. #Emefiele.
What this means: This is a veiled attack on other competing and probably more beneficial ways of remitting money to Nigeria. Increasing Transparecy is basically allowing the CBN to track dollar inflows from Diaspora Nigerians and see which sectors it is flowing into.
READ: New CBN Circular: CBN confirms only Banks can pay IMTO dollars
6. PwC forecasts suggest that Nigeria’s remittance flows could reach US$34.89 billion by 2023. But this can only be accomplished if remittance infrastructure improves and if the right policies are put in place.
What this means: Interesting to note that the PWC forecast quoted by the CBN is based on data obtained from the World Bank and IMF, who in turn also base their data from the CBN and other sources.
7. The use of reimbursements of remittance fees has been critical in supporting improved inflow of remittances to countries in South Asia and in improving their balance of payments position following the COVID-19 pandemic.
READ: CBN expects $24bn annual diaspora remittances – Emefiele
What this means: The CBN appears to have modeled this new scheme on similar policies in Asian countries. Bangladesh also has a similar scheme.
Consistent with the global trend, Nigeria aspires to ensure that remittance flows and diaspora investments become a significant source of external financing. #Emefiele
— Central Bank of Nigeria (@cenbank) March 6, 2021
dsctrack
January 23, 2021 at 10:31 pm
u said no more dollar remittance now it has backfired. tell me these guy are not confused with so much tyrant policies.terribly clueless,half baked, primary school economic knowledge.na wa o
Rabiu Hakeem
January 24, 2021 at 3:28 pm
This thing is affecting me, my friend from Israel can’t send money to me because they don’t use dollars please allow international money transfer in naira remittance please 🙏 because is not all the Nigeria citizen is in favour by this new dollars remittance
Esther Naya
January 24, 2021 at 10:47 am
The world is opening up and using technology to make things easier. Nigeria is making policies that add layers of difficulty to its citizens. Proper half baked.
Raphael
January 24, 2021 at 2:40 pm
Nigerians in diaspora will be stupid to not use their money as leverage to force good governance. They need to save more of their money and only bring it to Nigeria only and if a responsible government is in place. Granted they support school fees and medical bills of relative that can’t wait but what then is government doing for education and health. Its like throwing money into air or water in a basket. Let them force good governance, starve the stealing politicians and negotiate diaspora voting, security for property and lives. Why spend money to support a system that doesn’t let your voice be heard, won’t guarantee your safety when you come home and dosen’t care about your needs.increasingly disaporans are being singled out as abandoners instead of the heroes they are.
Irabor Kingsley Ehis
January 24, 2021 at 6:33 pm
We have many Nigerians in the Diaspora who needed financial help from relatives at home, business Nigerians and students who are in the need of money abroad, please tell us how this issue transfer abroad can be solved.