AS part of measures to promote transparency in the management of diaspora payments, the Central Bank of Nigeria (CBN) recently announced an amendment to procedures for receipt of diaspora remittances through International Money Transfer Operators (IMTOs) that would now allow beneficiaries to receive such inflows in US dollars either as cash or in their domiciliary accounts held at designated banks of their choice.
Governor of the CBN, Godwin Emefiele, while justifying the amendment, said investigations and analysed data on IMTO inflows into the country revealed that some IMTOs encouraged the use of unsafe unofficial channels, which also supported diversion of remittance flows meant for Nigeria, thereby undermining the country’s foreign exchange (FX) management framework.
“Some IMTOs, rather than compete on improving transaction volumes and create more efficient ways for Nigerians in the Diaspora to remit funds, resorted to engaging in arbitrage arrangements on the naira-dollar exchange rate, which to a large extent resulted in significant drop inflows into the country,” he said.
Our findings reveal that Nigerians in the diaspora are receiving this policy adjustment with mixed feelings. Nene Oseiwe, who resides in New Jersey with her family, told The ICIR that the regulatory agency’s move was necessary to check the problem of the dual exchange rate in the country.
“I think it should fix the FX crisis. The way it used to work was, if I sent you dollars, they would pay you at CBN’s rate, which is N390. But if I came with that same dollars and gave it to you, you would exchange it at N450 in the open market, so it was problematic,” she said.
“It’s problematic for a country to be having many exchange rates. People would buy dollars from the CBN at N380 and sell it at N460. No value-added, no products, no road, no electricity, nothing; just because they have access,” Oseiwe added.
Augustine Ogidan, residing in Hurts Texas, told our reporter that the new procedure for diaspora remittance was a welcome development as it was convenient and removed the middlemen short-changing beneficiaries.
“I think it’s the best way to go. It might be a little bit inconvenient to those that wouldn’t know what to do, but it would remove the middlemen that cut into the actual amount that is due to the recipients. There are Western Union and MoneyGram locations in grocery and convenience stores in every city here. One can do it online as well,” he said.
On Twitter, however, the reception is different. Most comments on the diaspora remittance policy adjustment reveal that there is still a gap in understanding the implications of this reform expected to, among other things, help finance a future stream of investment opportunities for Nigerians in the diaspora, while also guaranteeing that recipients of remittances would receive a market-reflective exchange rate for their inflows.
Osaretin Victor Asemota using the handle @asemota wrote: “Dear @cenbank, I am in the diaspora and I have relatives at home that I send money to. I want to use whatever remittance channel works best for me and not what works best for you because IT IS MY MONEY. My money can be sent the way I want it to be sent because it is MY RIGHT.”
Another tweet by @theafrobeats read: “@cenbank need reverse this new remittance policy because it does (not) benefit both Nigerians in diaspora and home! This is inconvenient, to say the least! If CBN thinks any IMTO cheating Nigerians in the exchange rate, please revoke that IMTO licence! Moreover, we were not complaining!”
According to @lloydatiku, “CBN is only fighting to keep its monopoly power…on diaspora remittance ($26billion annually).” A Twitter user with the handle @ganXE called for an outright reversal of the policy: “I think the regulator should reinstate direct to naira accounts for IMTOs. This was an own goal against diaspora remittance.”
The Single/Multiple FX Rate
It would be noted that economic experts and business leaders in Nigeria have long argued that a single exchange rate for the naira will put Nigeria at a competitive advantage for the cross-border open trade.
Amine Mati of the International Monetary Fund (IMF) had emphasised that exchange rate unification should be a policy-driven decision that the government must make, arguing that multiple exchange rates had different implications across different countries in the world.
“The IMF’s policy has been consistent on this issue, such that we advise for the unification of exchange rates and the Central Bank of Nigeria and Economic Recovery and Growth Plan are already working in this direction to ensure that the country has a unified exchange rate,” he said during a Special Policy Dialogue Colloquium held in Lagos in 2019.
Managing Director of the Financial Derivatives Company (FDC), Bismarck Rewane, also stressed that unifying the exchange rate would positively impact the Nigerian economy than the current multiple exchange rate regime, which created arbitrage opportunities, would do.
Moving to the Cryptocurrency Market
Many Nigerians say that since 4th December 2020 when the policy took effect, they have turned to cryptocurrencies which are easier, more convenient option for sending money to their loved ones back in Nigeria.
Using the handle @obi_sage, Obi Sage Okoli tweeted: “We now remit through cryptocurrencies and not CBN because it’s easier and much more efficient. Remittance from the diaspora hasn’t dropped, rather it’s remittance thru CBN that tanked.”
SuperEmbee also wrote on Twitter: “Foreign currency inflow into Nigeria is at a 4-year low. Nigeria isn’t making $£€. Banks are unable to meet the demands of diaspora remittance withdrawal. Nigeria is unable to pay in foreign currency. Citizens of Nigeria are now remitting funds through crypto exchanges bypassing the banking system. This act does not improve foreign currency supply in the economy. This will affect economic development, our naira value etc.”
“Remittances – It’s all about the benjamins. Diaspora remittance dropped drastically last year signalling one of two things: 1. People were finding non-official channels to send money (e.g. crypto) 2. Covid impacted diaspora earnings so much that people couldn’t send money back,” Hachi @senor_hachi wrote.
In recognition of the escalation in the use of cryptocurrencies by Nigerians and to protect the integrity of the financial system from the risks inherent in crypto assets transactions, the CBN in a statement released on Sunday reiterated that the use of cryptocurrencies in Nigeria was a direct contravention of existing law and remained prohibited.
The acting director of corporate communications, Osita Nwanisobi, said, “In light of the fact that unregulated and unlicensed entities issue them, their use in Nigeria goes against the key mandates of the CBN, as enshrined in the CBN Act (2007), as the issuer of legal tender in Nigeria.”
Meanwhile, as part of measures to improve diaspora remittance flow visibility, the CBN is planning to launch a central reporting portal for all foreign remittances. The portal will be managed by the Nigerian Interbank Settlement System (NIBSS).