The Central Bank of Nigeria (CBN) has extended the deadline for the Naira 4 Dollar scheme introduced in March to boost diaspora remittances.
The apex bank announced in a statement that the scheme, which was scheduled to end on May 8, would continue until further notice.
The circular, signed by Director, Trade and Exchange Department, CBN, Saleh Jibrin, stated: “Further to the CBN Circular referenced TED/FEM/PUB/FPC/01/003 dated 05 March 2021 on the above subject matter, which was originally scheduled to end on May 8, 2021, we hereby announce the continuation of the scheme until further notice.”
The scheme offers recipients of diaspora remittances through CBN’s International Money Transfer Operators (IMTO)s, N5 for every $1 received as remittance inflow.
The extension has come amidst a growing economic crisis that has seen the naira in free fall, forcing the apex bank to take drastic measures to curb the shocks.
However, experts believe the naira 4 dollar scheme is far from the solution to Nigeria’s forex and economic crisis.
Chief Executive Officer of Financial Derivatives Company Bismarck Rewane described the scheme as a ‘promo gimmick’, and “unusual.”
“The Central Bank would probably understand in the end that there is no other way of managing an exchange rate than having one rate so that people would stop exploiting it,” said Rewane.
Naira fell against the US dollar to close at N411 to a dollar on Thursday, representing a 50 kobo decline when compared to N410.5/$1 that was recorded on Wednesday. But it has gained more than N4 as of Friday, trading at N406.6746/$1 at the interbank market.
Meanwhile, the naira maintained stability at the parallel market, trading at N485/$1, while Nigeria’s external reserve plunged $28.94 million to close at $34.76 billion on Wednesday.
The cryptocurrency effect
The impact of cryptocurrency in the declining diaspora remittances through regulated financial institutions is among the reasons why the CBN ban crypto trading and introduced the naira 4 dollar scheme. However, more than four months after the ban, and three months after the scheme was launched, Nigerian Peer-to-peer (P2P) transaction volume has risen to a defiant height.
Paxful, a peer-to-peer trading platform, said Nigeria’s cryptocurrency traded volumes on the platform topped $1.5 billion in the first four months of the year 2021. This figure represents almost a third of Paxful’s global total volume of $5 billion. This latest traded volume also signals that more Nigerians are switching to P2P, defying CBN’s attempt to curtail the shift of diaspora remittance from conventional financial system to cryptocurrency.
Nigeria thus retains its status as one of the biggest cryptocurrency markets globally.
Nigeria’s diaspora remittance is currently estimated at $25 billion, and the central is targeting at least $30 billion annual remittance to curtail COVID-19 strains on the economy. Some experts believe the move will help the African largest economy to stay afloat amidst decline in oil revenue.
“The projection is that very soon, we can hit as much as $30 billion in terms of diaspora remittances annually which can be directed at investments at home. The chambers of commerce, which is located all over the country, is a solid platform through which these diaspora remittances can be channeled into developmental purposes,” Director-General of the Nigerian Association of Chambers of Commerce, Industry, Mines, and Agriculture (NACCIMA) Ayo Olukanni said.
But the indefinite extension of the scheme is also seen as a sign of Nigeria’s vulnerability amidst heightening economic turmoil. The Nigerian National Petroleum Corporation (NNPC) said last week there will be no FAAC, distribution of revenue allocation to states and local governments in May, underlying how empty the government purse is. The government is therefore, besides borrowing, appears to be counting on diaspora remittances to spur economic growth.