Diaspora remittances to Nigeria witnessed a huge decline in H1 2023, according to the latest International Payment data released by the Central Bank of Nigeria. Compared to the $10.11 billion recorded in the same period last year, the decline has dealt a massive blow to Nigeria’s hope to boost its forex liquidity with Diaspora remittances. (The data quoted here seems not correct since Nigeria received about $20 billion remittances in 2022)
A detailed analysis of the data revealed that Nigeria witnessed a gradual increase in remittances over several months in 2023. In January, the country recorded $79.2 million in remittances, which slightly rose to $83.8 million in February. March witnessed a significant jump in total direct remittances, reaching $138.6 million.
In April, the country received $150 million as direct remittances, followed by a further increase to $202.9 million in May. By June 2023, total direct remittances reached $297.5 million, indicating a consistent upward trend in remittances.
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The CBN did not give a reason for the decline, which has raised concerns about the nation’s chances of addressing its forex changes in the short term. However, Partner, Chief Economist, and Head of Research at KPMG Nigeria, Dr. Yemi Kale, attributed the decline to probably “election uncertainty and the CBN cash and forex drama in Q1.” He said he won’t be bothered till he sees “Q3 and Q4” remittance data.
Nigeria’s major source of forex inflow is crude oil export. But the crisis in the oil sector has seen a drastic reduction in the country’s earnings from crude oil export, forcing it to largely rely on Diaspora remittances, which is regarded as its second major source of forex.
In 2021, the CBN introduced the Naira4dollar remittance scheme, as a way to encourage Nigerians living abroad to send foreign currencies back home. Under the scheme, commercial banks were required to pay recipients of remittances the incentive of N5 for every $1 remitted and received.
There was also the RT200 FX Programme launched in early 2022, with a set of policies and plans for non-oil exports. The aim is to use the programme to attain the goal of $200 billion in FX repatriation, exclusively from non-oil exports, in 3-5 years.
In 2022, Nigeria recorded $20.16 billion in Diaspora remittances, augmenting the meager forex proceeds from crude oil sales.
The Naira4Dollar scheme and the RT200 FX Programme have been discontinued following the floating of the FX market last month.
Meanwhile, the central bank has issued a directive to International Money Transfer Operators (IMTOs) to begin disbursing remittances to beneficiaries in Naira, alongside foreign exchange.
The apex bank specified that the exchange rate used for determining the Naira pay-out should be based on the Investors and Exporters’ Window foreign exchange rate.
The directive was outlined in a circular, referenced as FED/FEM/PUB/FPC/001/004, issued by Dr. Ozoemena Nnaji, the Director of Trade and Exchange at the CBN.
The circular, dated July 10, 2023, builds upon a previous circular dated November 30, 2022, which introduced guidelines for the payout policy of Diaspora remittances to beneficiaries in Nigeria.
The November 30 circular facilitated the payment of remittances in U.S. dollars to beneficiaries through IMTOs, providing unrestricted access to their funds via their chosen designated bank.
The new circular emphasizes that the option of Naira payment is an additional choice available to recipients of Diaspora remittances, in addition to United States Dollars and E-Naira.
The CBN’s full circular states, “Further to the circular referenced FED/FEM/FPC/01/011 dated November 30, 2022, in respect of the above subject, the Central Bank of Nigeria hereby announces Naira as a payout option for receipts of proceeds of International Money Transfers.
“Accordingly, all recipients of Diaspora remittances through the CBN-approved International Money Transfer Operators (IMTOs) on the attached list shall henceforth have the option of receiving Naira payment in addition to USD and e-Naira as payout options.
“For the avoidance of doubt, IMTOs are required to pay out the proceeds using the Investors’ & Exporters’ window rate as the anchor rate on the date of the transaction.
“The regulation takes effect immediately.”