The Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, Taiwo Oyedele, has disclosed that a mere 10% of the $20 billion 2023 diaspora remittances reached the Nigerian foreign exchange market.
Oyedele made this disclosure during a panel discussion at the 2024 Economic Outlook and Budget Analysis organised by the Lagos Chamber of Commerce and Industry, LCCI.
He noted that while the World Bank estimated that a total of $20 billion was brought to Nigeria in 2023, most of the funds were externalized through digital transfers from other countries.
According to him, the Nigerian foreign exchange market’s incapacity to absorb these remittances has added to the liquidity shortfall in the market.
He said,
- “The World Bank said for 2023 our diaspora remittances was about $20 billion. We estimate that more than 90% of that did not get to Nigeria. They were being externalized.
- “We’ve spoken to loads of Nigerians almost everywhere and they told us how they send money now. They use digital apps. We have the list of those apps. They use parallel market rates. So, they credit Naira here in Nigeria without bringing the Dollars.”
Speaking on how the federal government intend to capture these funds, Oyedele said his committee is recommending that the foreign exchange market be digitize to capture all transactions done in the market.
He added that the federal government needs to expand the official foreign exchange market to include BDC and Fintech, adding the CBN can then regulate them to ensure transparency and accountability.
- “Almost all our FX sources are electronic. On our own, we will convert it into physical cash by importing dollars into Nigeria. So, one of our recommendations is that the government should digitize the FX market and the CBN can set a threshold.
- “We need also to have convergence in the official market and the parallel market. One of our recommendations to be able to do that is to expand the official market. Why is it that it is only the CBN and the banks that are in the official market? Why don’t you bring in BDC? Why don’t you bring in these apps? And then regulate and have clear rules for price determination.”
What you should know
- The naira has lost around 55% of its value since the Central Bank devalued it in June 2023 through the unification of the foreign exchange market.
- While the policy was geared towards attracting more liquidity, things haven’t gone on as planned.
- Nairametrics daily FX watch showed that the Naira slumps to a new low against the dollar on Wednesday, January 17 2023, at the official market at N1,320 per dollar.
- Meanwhile, the Minister of Finance and Coordinating Minister of the Economy, Wale Edun stated yesterday in an interview with Bloomberg TV on the sidelines of the World Economic Forum (WEF) in Davos, Switzerland, that the federal government is in talks with the World Bank for a $1.5 billion loan to support the budget and also provide liquidity in the forex market.
- He stated,
- “We’re hoping to get $1 billion or $1.5 billion from the World Bank. It is a matter of discussion at the moment, but we think we will get the support because we are continuing with our reforms.”
- “What we’ve done with fuel subsidies, what we have done in terms of the foreign-exchange market reform, deserve support. We’ve done enough and we deserve to be rewarded imminently.”