The Central Bank of Nigeria (CBN) on March 5 introduced the Naira4Dollar scheme to encourage increased diaspora remittances into the country.
Announcing the introduction of the scheme in a circular, Saleh Jibrin, CBN ‘s Director, Trade and Exchange Department, said that it would allow all recipients of diaspora remittances to be paid N5 for every dollar received.
It was initially scheduled to run for three month, commencing from March 8, and terminating on May 8 but later extended indefinitely.
Jibrin said that beneficiaries would get the incentive, whether they collected the remitted dollars as cash across the counter or through their domiciliary accounts.
He instructed all commercial banks and International Money Transfer Operators (IMTOs) to ensure the success of the scheme.
“In an effort to sustain the encouraging inflows of diaspora remittances into the country, the CBN hereby announces this scheme as an incentive for senders and recipients of international Money Transfers.
“All recipients of diaspora remittances through CBN licensed IMTOs shall henceforth get N5 for every one US dollar received.
“This incentive is to be paid to recipients whether they choose to collect the dollar as cash across the counter in a bank or transfer same into their domiciliary account,” Jibrin said.
The CBN Governor, Mr Godwin Emefiele, said that the new scheme would enhance a transparent and more flexible remittance administration.
Enefiele stated that the scheme would greatly enhance the benefits of diaspora remittances in supporting investments and economic growth in Nigeria.
He said that the scheme was consistent with the global trend, adding that the apex bank aspired to ensure that remittance flows and diaspora investments became a significant source of external financing.
He said: “CBN strives to constantly improve our remittance infrastructure, ease the process of international money transfer and simplify the experience for senders and recipients.
“We believe this new measure will help to make the process of sending remittance through formal bank channels cheaper and more convenient for Nigerians in the diaspora.
“The new 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 said that the policy was aimed at reducing rent-seeking activities and providing Nigerians in the diaspora with cheaper and more convenient ways of sending remittances to Nigeria.
He added that similar schemes had helped boost economies of some other countries across the world.
He said: “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.”
The scheme appeared to have challenged other channels of remitting money to Nigeria.
It reduced excess transfer charges, and encouraged transfer of money through Nigerian banks, getting an extra N5 for each dollar in the process.
Some analysts opined that with the new arrangement sending remittances through Nigerian banks would be cheaper and more convenient.
Authorised dealers hint of significant increase in volume of foreign exchange inflows by diaspora remittances through the banks.
They put weekly average inflow at 50 million dollars, up from about 20 million dollars before the Naira4Dollar scheme was introduced.
At 50 million dollars a week the CBN could be attracting about 2.6 billion dollars per annum. This will be a huge increase from the estimated 1.1 billion dollars received in 2020 from diaspora remittances.
By the time the incentive was about to lapse in May 8, the CBN announced an indefinite extension, an indication that it may have yielded positive results.
Announcing the extension, Jibrin said that all aspects of the operationalisation of the scheme were to remain the same.
The extension, however, came in the midst of increased pressure on the Naira.
Records show that the Naira now goes for about N490 to a dollar at the black market while the investors’ and exporters’ (I&E) window rate is around N410 to a dollar. The CBN official rate, however, remains N380 to a dollar.
PricewaterhouseCoopers (PwC), a multinational professional services network of firms, forecasts that Nigeria’s remittance flows could reach 34.89 billion dollars by 2023.
According to the firm, this can only be accomplished if remittance infrastructure improves and if the right policies are put in place.
Also, WorldRemit, a global cross-border payments company, expressed support for the decision to extend the deadline of the scheme.
The company said, in a statement by its Country Manager for Nigeria and Ghana, Gbenga Okejimi, noted that the scheme was launched as a strategy to maintain the increased levels of payments recorded earlier in the year and encourage the use of licensed IMTOs.
“The CBN believes this incentive will improve foreign exchange inflows and boost liquidity in the foreign exchange market,” he said.
Okejimi said that the CBN’s decision to extend the scheme, which he described as a win-win situation, was a welcomed development.
Apart from dependants expecting money from loved ones abroad, the scheme also enables small business owners operating in Nigeria to receive funds from clients without the need to provide domiciliary account numbers in the first instance.
They will only be required to provide their Naira bank account number and their bank would open a domiciliary account number once a remittance inflow is received.
Dealers believe that if the initiative is sustained, it could create an effective platform for the retail market to receive or earn a significant amount of foreign exchange without the need to own any competing account.
Some experts, however, believed that the transparency in the diaspora remittance through the Naira4dollar scheme would allow the CBN to track dollar inflows from diaspora Nigerians and see which sectors it was flowing into.
However, Chairman of the Association of Bureau De Change Operators in Nigeria, Aminu Gwadabe, said that the policy had not comprehensively addressed challenges in diaspora remittances.
He said,: “though the Naira4Dollar policy is a step in the right direction, it is not totally comprehensive to address the constraints in the remittance space in the economy.
“The major challenge is the fixed exchange rate versus the parallel market rate in the market. Also, the involvement of high-level institutions like banks with heavy infrastructural costs makes it very costly.
”Thirdly, factors like the prevalence of unregulated channels is a major setback to most policy initiatives.
“This measure will ultimately help to make the process of sending remittances through formal bank channels cheaper and more convenient for Nigerians in the diaspora, hoping this will help boost liquidity in the retail end of the forex market.”
As the country grapples with severe revenue challenges, stakeholders remain hopeful that an increase in foreign receipts through diaspora remittances would go a long way to bridge the dollar gap and also address balance of payments deficits.
…Your path to credible news