Nigeria Banks To Start FX Payout Under New Diaspora Remittance Rules

Nigerian banks will on Friday commence dollar payout for diaspora inflows and close naira remittance accounts after the regulator eased money transfer rules to try to boost forex liquidity in the country, the central bank said on Thursday.

Rising dollar demand has been putting pressure on the naira. Importers with obligations have scrambled for hard currency, while providers of foreign exchange, such as offshore investors, have exited after COVID-19 triggered an oil price crash..

Nigeria is hoping it can attract more remittances from its diaspora after central bank on Monday lifted restrictions that have hindered inflows.

It said the changes will help reduce arbitrage whereby money transfer operators profit from unofficial channels.

The naira has weakened sharply on the black market since last month. On Monday, it traded at a 3-1/2 year low of 500 naira to the dollar, widening the premium between the official market where the currency is stuck at 381 since July.

The central bank said it meet commercial banks and money transfer operators on Thursday to discuss the changes, which could help boost Nigeria’s balance of payment and reduce its dependence on foreign borrowing.

Under the new rule, diaspora remittances would be paid in cash in U.S. dollars or into a domiciliary (foreign-currency) account at market rates. In the past, remittances were paid in naira and the bank had restricted domiciliary account usage.

Nigeria is the world’s fifth-biggest destination for international remittances, with 5 million Nigerians living abroad sending money back to relatives, according to Western Union.

PricewaterhouseCoopers estimated that diaspora flows into Nigeria totaled $23.63 billion in 2018, representing 6.1% of GDP.

– Reuters