Recently, the Central Bank of Nigeria claimed that Nigeria diaspora remittances surged significantly following the launch of the Naira4Dollar scheme in March 2021. Godwin Emefiele, governor of the Central Bank of Nigeria (CBN), stated this reason in a speech to journalists on Thursday, February 10, 2022, following the Bankers Committee meeting.
The data, however, have not supported the claim, as Nigeria’s reserves are depleting so fast as a result of the diaspora remittances. As a result of the 1,566.6% increase in diaspora remittances, the Nigerian currency, Naira, continues to lose value.
According to the CBN website obtained from the Nigerian government, the country’s external reserves have decreased to $39.87 billion as of February 10, 2022. It is the lowest level since October 29, 2021, when it stood at $41.82 billion, a decrease of 4.66 percent. As CBN continues to pump dollars into the commercial banks and foreign exchange market to meet demands and prevent further depreciation of the Naira, the reserves are depleting.
A weekly injection of $210 million by the Central Bank of Nigeria closed Monday’s Naira/dollar exchange rate flat at N430.00/USD.
CBN could rebate 20 billion monthly
To increase Nigeria’s foreign reserves and diaspora remittances, the CBN introduced the Naira 4-dollar scheme on March 8, 2021. According to a Ripples Nigeria report, every dollar that a Nigerian sends home abroad is accompanied by an N5 gift. According to Emefiele, at the banker’s committee, “Before the promo deposit money banks, International Money Transfer Operators (IMTO) in the country processed $6 million per week but the figure has jumped to $100 million weekly.” So therefore, for $1 million sent home, the sender gets N5 million in return. $100 million weekly remittances will attract N500 million while N1 billion in 2 weeks will attract a reward of N2 billion in a month.
An expert offers further insight.
According to Taiwo Oye-dele, head of Tax and Corporate Advisory Services at PwC, comparing the $30m weekly remittances today with $6m at the height of the pandemic is not an accurate assessment of the situation.
He said: “We should rather compare the current level of remittances to the pre-pandem- ic period and also interrogate whether the improvement recorded so far is merely a transfer between remittance channels rather than an increase in inflows”. Nevertheless, he said the aggregate inflows of foreign exchange from all sources are yet to meet the country’s demand, leading to sustained pressure on the external reserve and thus the relative value of the Naira.
CBN head criticises Emefiele’s decision to ban BDC operators from selling forex
In related news, former deputy governor of the Central Bank of Nigeria (CBN), Obadiah Mailafia, has blasted the decision of the apex banking institution to stop providing foreign exchange to bureau de change operators. According to Mailafia, the decision will weaken the value of the naira against the dollar and other foreign currencies, as there will be a shortage of foreign exchange. From his experience of the Nigerian banking system, Mailafia says the banks could hoard forex and then sell it at high price when they want.