For millions of Nigerian immigrants scattered across the globe, the CBN’s new policy on remittances would have great impacts on their family and friends who live back home in Nigeria and require these funds for daily activities. Recall that, on December 4th, 2020, the Central Bank of Nigeria announced a new policy that allows unhindered access to Diaspora remittances in Nigeria. Under the new rule, remittances would be paid cash in U.S. dollars or into a domiciliary (foreign currency) account at market rates. The apex bank instructed all International Money Transfer Organizations (IMTO) to deploy all the necessary tools to ensure compliance with the new directive.
The CBN also directed the closure of all naira ledger accounts by Deposit Money Banks (DMBs) to discourage the use of unsafe and unofficial channels, which have strengthened the diversion of remittance flows meant for Nigeria. A PwC report further explains that lots of remittances are unaccounted for due to increased dependance of informal methods that are less expensive and uncomplicated. The apex bank in its directive, also stipulated that “strict sanctions including withdrawal of operating licenses, shall be imposed on any individual and/or institutions found to be aiding, abetting, or directly contravening these guidelines”.
It’s been two months since the implementation of the new policy – most IMTO and banks have already begun remittance payouts in USD and at the forefront of championing USD payouts in Nigeria, we have seen IMTOs like WorldRemit, ensuring that its customers are adequately served. Following the announcement of the Central Bank of Nigeria (CBN), WorldRemit moved quickly to adopt the new requirements and was the first digital service to offer its customers the option of USD cash pickup in Nigeria. Its customers can continue to send money transfers quickly and securely to Nigeria via multiple payout methods such as bank accounts, cash pick up and airtime top-up.
The new CBN directive is expected to boost remittance inflows and foster an environment that would enable a faster, cheaper, and more convenient flow of remittances back to Nigeria and the CBN Governor, Godwin Emefiele, stressed that this new policy will provide more liquidity for the country’s foreign exchange market.
When the announcement of the new policy was made, analysts pondered on why it had taken so long for the CBN to implement remittances in foreign currency. A few others questioned why recipients are not given the opportunity to decide what currency they would want to be paid in. Others commended the move by the CBN citing that availability of USD will ensure that their friends and family get the exact value of remittances in dollars, thereby lowering the unnecessary pressure on the naira. They say the policy will in turn cause a reduction in exchange rate. However, the availability of foreign currency for USD payouts has also become a concern for many senders and recipients. To ensure that recipients receive funds when due, digital remittance platforms such as WorldRemit are broadening their partner networks.
This IMTO, has one of the largest bank payout network for transfers to USD bank accounts in Nigeria, which includes Access Bank, FirstBank, Fidelity, GT Bank, UBA and FCMB, with ongoing plans for further expansion. Cash pickup in USD is also available from the following banks: Fidelity Bank, First Bank, Access Bank, Polaris Bank, FCMB, Zenith Bank and Union Bank. The Central Bank has also directed that all remittances must be collected with a valid means of identification and WorldRemit has also advised recipients to present both numbers along with their ID at cash collection points.
Nigeria is the largest remittance market in Sub-Saharan Africa, accounting for over 50+% of both Africa-to-Africa and global to Africa remittances, according to a World Bank report. In 2019, remittance inflows to Nigeria were worth $23.8 billion; Ghana, $3.5 billion; and Kenya, $2.8 billion. Also, according to the World Bank, sub-Saharan Africa is the most expensive place in the world to send money with remittances charges as high as 20% in some regions.
Interestingly, the COVID-19 pandemic has caused a shift in consumer behavior towards remittances – people now want digital services that offer cost-effective prices. Transfer fees to Nigeria cost zero fees when using the WorldRemit platform, an incentive that began on the brand’s celebration of Nigeria’s Independence Day in 2020. Safety of funds transferred to Nigeria are also guaranteed as the international payments company launched its Transfer Tracker app last year to customers – who can now track their funds until the point of receipt.
It is hoped that remittances will continue to be of strong economic value to Nigeria despite the harmful effects of the pandemic.