Nigerian economy desperately needs diaspora remittances, says Emefiele

Central Bank of Nigeria (CBN) Governor, Mr Godwin Emefiele, has highlighted the importance of diaspora inflows to the economy, stressing the country will be in a position to reap its benefits if remittance infrastructure improves.

He spoke on the newly introduced “CBN Naira 4 Dollar Scheme,” an initiative aimed at incentivising senders and recipients of international money transfers.

Emefiele spoke at a webinar organised by Fidelity Bank Plc, entitled, “The New FX Policy, Implications and Positive Impact on Diaspora Investments”.

The CBN governor explained that the new policy was expected to attract diaspora remittances through the official foreign exchange channels as well as support forex stability in Nigeria.

The CBN had earlier in a circular dated March 5, 2021, signed by A.S. Jibrin, on behalf of the Director, Trade and Exchange Department, stated that the new initiative would become effective on Monday and Saturday, May 8, 2021.

In line with this initiative, all recipients of diaspora remittances through CBN’s licensed International Money Transfer Operators (IMTOs) shall henceforth be paid N5 for every $1 received as remittance inflow.

The apex bank said in the circular, “The CBN shall through commercial banks, pay to remittance recipients the incentive of N5 for every $1 remitted by sender and collected by the designated beneficiary.

“This incentive is to be paid to recipients whether they choose to collect the United States dollar as cash across the counter in a bank or transfer same into their domiciliary account. In effect, a typical recipient of diaspora remittances will at the point of collection, receive not only the USD sent from abroad, but also the additional N5 per USD received.”

Providing more insight into the new policy, Emefiele said it would offer Nigerians in the diaspora a convenient way to send remittances, adding that it would also aid diaspora investments.

He said, “Our 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.

“In addition, we believe that this new policy measure will encourage banks and financial institutions to develop products and investments vehicles geared towards attracting investments from Nigerians in the diaspora. We have no doubt that these changes can help to finance a future stream of investment opportunities for Nigerians living abroad.”

However, Emefiele said, “Yet, the introduction of the new policy presented new challenges, as operators and remittance service providers were initially unable to integrate with the agent banks.” He said the central bank would continue to work to resolve the intermittent interface challenges in the marker.

Emefiele disclosed that the average cost of sending $200 worth of remittance to Nigeria from the US was about 4.7 per cent.

He said, “Countries in South Asia, such as Pakistan and Bangladesh, are aware of this impact and they introduced reimbursement schemes to support inflows.

“In Pakistan, the scheme, which is known as free send, has enabled record amount of inflows of over $2 billion a month even during the COVID-19 pandemic. Bangladesh introduced its own scheme in June 2019, which is a two per cent rebate on remittance inflows. Following this action, they have also seen a 20 per cent boost in remittance inflows.

“On the topic of round tripping, there is a maximum amount that you can remit through an IMTO. You can’t send a $100,000 through an IMTO. The CBN’s action, while it does not go far enough in offering total reimbursements, is a step in the right direction in reducing the cost burden for Nigerians remitting funds to Nigeria.”

Emefiele also disclosed that the central bank had been engaging the IMTOs and the banks to ensure more convenience in fund remittance.

He said, “In an effort to reduce the cost burden of remitting funds to Nigeria by working Nigerians in the Diaspora, the Central Bank of Nigeria has introduced a rebate of N5 for every $1 of fund remitted to Nigeria, through IMTOs licensed by the central bank. This rebate will be provided to the bank accounts of beneficiaries, following receipt of remittance inflows.

“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. This new policy is expected to take effect on the 8th of March 2021.

“Accordingly, the CBN strives to constantly improve our remittance infrastructure, ease the process of international money transfer and simplify the experience for senders and recipients. In this regard, we note that the efficiency of remittance services, especially as provided by the IMTOs is critical to our aim of boosting inflows. We would constantly seek to fine-tune our policies to mitigate factors that affect the quality of service customers face when using IMTOs.”