Diaspora Remittances In Quantum Leap As CBN Embarks On Ambitious Reforms

No Time Wasting In Removing Bottlenecks Hindering Inflows – Spokesperson

Economy Now More Attractive To Bona-fide Foreign Investors – Expert

Nigerians living in the diaspora have sent at least $1.5bn to their relatives back home in six months as the country received a record $553m in July alone.

This is according to an analysis of inflows from the Diaspora conducted by THE WHISTLER for the months of January, February, March, April, May and July 2024.

In the midst of the foreign exchange crisis, the CBN has severally admitted that Diaspora remittances are a crucial source of foreign exchange for Nigeria which supplements both foreign direct investments and portfolio investments.

The CBN has a target of attracting $1bn monthly from diaspora Nigerians to complement FDIs and FPIs.

Since the CBN began reforms to attract foreign exchange, remittances have seen a growth trajectory. In January, diaspora Nigerians remitted $138.56m which rose by 75 per cent year on year from $79.19m recorded in January 2023.

The figure fell to $39.14m in February which is a 53 per drop as against $83.76m recorded in the corresponding period of last year.

In March, Nigeria recorded $104.90m as remittance from the Diaspora, up also dropping 24 per cent from the $138.63m remitted in March 2023.

The first quarter of 2024 was a bad period for remittances when measured year-on-year as only $282.61m which is 62.28 per cent down compared to $301.57m remitted in the Q1 of 2023.

However, the remittances received a boost at the start of the second quarter as they rose to $193.31m in April 2024 as the apex bank stepped up measures to encourage Diaspora remittances.

In May, Diaspora Nigerians remitted a total of $365.44m showing a significant improvement from April 2024 which indicates a robust inflow from the diaspora.

In July, the figures skyrocketed to $553m which is more than half of its $1bn monthly target from Diaspora remittances alone.

The growth in Diaspora remittances has been linked to several initiatives of the apex bank.

The CBN activated plans to double foreign-currency remittance flows through formal channels by granting 14 new (IMTOs) Approval-in-Principle (AIP), according to the Bank’s Acting Director of Corporate Communications, Mrs. Hakama Sidi Ali.

“We are wasting no time driving progress to remove any bottlenecks hindering flows through formal channels permanently. We have a determined pathway and a sequenced approach to tackling all challenges ahead, working hand in hand with key stakeholders in the remittance industry,” she said in a circular.

In June 2024, the CBN released a circular granting IMTOs quick naira access and also granted IMTOs permission to sell forex on the official window.

The CBN said in August, “As part of CBN’s commitment to the smooth functioning of the foreign exchange markets and enabling greater remittance flows through formal channels, the bank has implemented measures that will enable eligible International Money Transfer Operators (IMTOS) access Naira (NGN) liquidity through the CBN. These measures are aimed at widening access to local currency liquidity for the timely settlement of diaspora remittances.

“Henceforth, eligible IMTO operators will be able to access the CBN window directly or through their Authorised Dealer Banks (ADBS) to execute transactions for the sale of foreign exchange in the market.”

Another initiative employed was introducing the willing buyer-willing seller model which has narrowed the rate between the parallel market and the official rate thereby making it less attractive to remit forex through unofficial means.

In the last five years, total remittances had fluctuated from $23.81bn in 2019, falling to $17.21bn in 2020 and $19.2bn in 2021.

In 2022, remittances rose marginally to $19.8bn and fell to $19.5bn by the end of 2023.

The reform to rejig diaspora remittances and foreign exchange inflows through FDI and FPI began under the current administration which took a bold step in introducing changes in the foreign exchange market by allowing only one official window.

The practice under former governor, Godwin Emefiele, where the naira was pegged and had disincentivised investors from coming into Nigeria.

In 2021, the Rand Merchant Bank’s (RMB’s) Milk Index found that the naira was overvalued by at least 250 per cent when it was pegged at around N460 per dollar.

Renowned economist and the Managing Director of Financial Derivatives Company Limited (FDC), Bismarck Rewane, said in August 2022 that the naira was over-valued by 200 per cent and investors and Exporters (I&E) foreign exchange window rate may be devalued.

Reacting to the rise in the growth trajectory of diaspora remittance, the Executive Chairman, African Centre for Shared Development Capacity Building (ACSDCB), Professor Olu Ajakaye, told THE WHISTLER that the remittances may be triggered by government policies.

The expert said that it would be beneficial if the remittances from the diaspora are going into developmental projects.

Ajakaye said, “If the remittances are going into investments, then one can say yes it is desirable. The question will now be where the projects and factories that these remittances are going into.

“If the increase in remittances are going into investment activities then one can say it is because the country is now more attractive to both foreign and diaspora investors. We also need to assess the complementarity of FDI and diaspora remittances. If FDI is growing and we are seeing where it is going, then it is a good development.

“If proper FDI is growing and remittance is complementing that by further increasing the amount for investment, then we can say it is a signal that the economy is becoming more attractive to all kinds of bonafide foreign investments including Nigerians abroad.”

Ajakaye explained that one of the factors impeding growth in diaspora remittances is that most Nigerians living abroad are trying to survive when compared to India which realised $107bn in remittances in 2023 alone.

“Most Nigerians living abroad are mostly doing menial jobs and they face challenges too in the country they reside,” he said adding, “A lot of Nigerians are distressed diaspora.”

He noted that, over time, Nigerians in the diaspora will be able to increase their remittances.

“The increase in remittance particularly the over $500m in July 2024 could be an encouragement but we need to keep improving on policies to grow remittances more,” he added.