Nigeria recorded a total of $282.61 million in direct foreign exchange (FX) remittances during the first quarter (Q1) of 2024, marking a decrease of $18.96 million or 6.28% compared to the $301.57 million recorded in Q1 2023.
This data, sourced from the Central Bank of Nigeria (CBN), marks the growing trend of fluctuating remittance inflows influenced by various economic and policy changes.
Direct foreign exchange remittances refer to money transfers from individuals abroad to family members or other recipients within Nigeria. These transactions, facilitated through international money transfer operators (IMTOs), are critical for supporting many Nigerian households and the broader economy.
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Breakdown of Remittance Payments
A closer year-on-year comparison of the monthly remittance figures reveals significant volatility:
– January 2023: Remittances totaled approximately $79.19 million.
– January 2024: Remittances surged to nearly $138.56 million, representing a 75% year-over-year increase.
– February 2023: Remittances amounted to about $83.76 million.
– February 2024: Remittances sharply declined to $39.15 million, indicating a 53% decrease year-over-year.
– March 2023: Remittances peaked at $138.63 million.
– March 2024: Remittances dropped to $104.91 million, a 24% decrease compared to the previous year.
Certainly! Here is the table in a plain text format that you can copy:
Tekedia Remittance Data Overview
| Month | Remittances 2023 (in millions USD) | Remittances 2024 (in millions USD) | Year-over-Year Change (%) |
|---|---|---|---|
| January | 79.19 | 138.56 | 75 |
| February | 83.76 | 39.15 | -53 |
| March | 138.63 | 104.91 | -24 |
These fluctuations may be attributed to various economic factors, policy changes, or other external variables impacting remittance flows during these months.
Policy Shifts and Strategic Initiatives
In an effort to boost foreign-currency remittance flows through formal channels, the CBN granted Approval-in-Principle (AIP) to 14 new IMTOs. Mrs. Hakama Sidi Ali, the Bank’s Acting Director of Corporate Communications, emphasized the CBN’s commitment to removing bottlenecks that hinder formal remittance flows.
“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,” Ali stated.
Increasing formal remittance flows is seen as a strategy to mitigate the historical volatility in Nigeria’s exchange rate, often caused by fluctuations in foreign investment and oil export proceeds. The CBN’s recent policy changes are part of this broader strategy.
In January 2024, the CBN issued a circular removing the cap on exchange rates quoted by IMTOs. Previously, IMTOs had to quote rates within a -2.5% to +2.5% range around the previous day’s closing rate of the Nigerian Foreign Exchange Market. By the end of January, the CBN released revised guidelines for IMTO operations, significantly increasing the application fee for an IMTO license from N500,000 in 2014 to N10 million in 2024, an increase of about 1,900% over ten years. Additionally, the minimum operating capital requirement for IMTOs was set at $1 million for both foreign and local entities.
Collaborative Efforts to Boost Remittance Inflows
To further enhance remittance inflows, the CBN established a Collaborative Task Force with IMTOs. This task force, reporting directly to CBN Governor Yemi Cardoso, aims to double remittance inflows into Nigeria. During a CBN roundtable at the World Bank/International Monetary Fund (IMF) Spring Meetings in Washington DC, experts discussed measures to improve foreign exchange remittance flows, including reducing transaction costs for the diaspora and advocating for Nigeria’s removal from the Financial Action Task Force (FATF) grey list to lower high transaction costs for remittances.
In January 2024, the CBN issued a directive requiring International Money Transfer Operators (IMTOs) to quote exchange rates for naira payouts to beneficiaries based on prevailing market rates at the nation’s official foreign exchange market. Also, beneficiaries are to be paid in naira. This policy shift, aimed at mopping up FX inflow, is believed to have contributed to the decline of diaspora remittances during the first quarter of 2024.
The decline in Q1 2024 remittances, juxtaposed with the significant increase in January, suggests a complex interplay of factors affecting remittance flows. While the CBN’s initiatives to streamline remittance processes and reduce costs are steps in the right direction, their full impact will likely unfold over the coming quarters.
Against the backdrop of Nigeria’s growing economic challenges, underpinned by FX illiquidity, economists reiterate that the role of remittances remains crucial. They not only support households but also contribute to the country’s foreign exchange reserves, helping to stabilize the economy. Economists and financial experts advocate for continued efforts to enhance formal remittance channels and address underlying economic factors that will be essential for sustaining and increasing remittance inflows in the future.