The Central Bank of Nigeria (CBN) has announced a remarkable 130% surge in remittance inflows, reaching a record $553 million in July 2024. This figure, the highest monthly total ever recorded, signifies a substantial increase from the same period in 2023 and is believed to underscore the effectiveness of the CBN’s strategic policies aimed at enhancing liquidity in Nigeria’s foreign exchange market.
According to a statement by Hakama Sidi Ali, the Acting Director of Corporate Communications at the CBN, this unprecedented growth in remittance inflows is a direct result of the central bank’s deliberate policy measures. These initiatives have been designed to bolster the flow of foreign exchange into Nigeria, stabilizing the market and supporting the country’s economic objectives.
Key among these measures is the licensing of new International Money Transfer Operators (IMTOs), which has expanded the network of channels through which remittances can be sent to Nigeria. Additionally, the CBN’s implementation of a “willing buyer-willing seller” model has provided greater flexibility in the foreign exchange market, allowing remittances to be exchanged more efficiently and at market-driven rates.
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Another significant policy move was the facilitation of timely access to naira liquidity for IMTOs, ensuring that these operators can meet the demands of remittance recipients without delays. This, combined with the recent easing of restrictions on exchange rates quoted by IMTOs, has made the Nigerian market more attractive to remitters and IMTOs alike.
Diaspora remittances have long been a critical source of foreign exchange for Nigeria, supplementing both foreign direct investment and portfolio investments. The CBN’s initiatives to increase remittance inflows are part of a broader strategy to harness this vital resource for economic stability and growth. The central bank has set an ambitious goal of doubling formal remittance receipts within a year, a target that seems increasingly achievable given the current trend.
Background: CBN’s Reforms and Strategic Moves
The impressive growth in remittance inflows can be traced back to several key reforms implemented by the CBN earlier in 2024. In January, the CBN removed the previous cap on exchange rates quoted by IMTOs, allowing for more flexibility and competitiveness in the market. This move was followed by the release of revised guidelines for IMTO operations, which included a significant increase in the application fee for an IMTO license—from N500,000 in 2014 to N10 million in 2024, reflecting a nearly 1,900% increase.
The CBN also set a minimum operating capital requirement of $1 million for foreign IMTOs, with an equivalent requirement for local operators. Initially, IMTOs were barred from purchasing foreign exchange from the domestic market to fulfill their obligations, but this restriction appears to have been lifted, allowing IMTOs to trade on the official market.
To further boost remittance inflows, the CBN established a Collaborative Task Force in partnership with IMTOs, tasked with doubling remittance inflows into Nigeria. This task force reports directly to the CBN Governor, Yemi Cardoso, highlighting the importance of remittances in the CBN’s broader economic strategy.
Moreover, the CBN recently granted 14 new Approval-in-Principle (AIP) licenses to IMTOs, further expanding the network of operators in the market. These steps, combined with ongoing reforms and efforts to streamline processes, have evidently paid off, as demonstrated by the record-breaking remittance inflows in July 2024.
The surge in remittances comes at a time when Nigeria is grappling with various economic challenges, including a volatile foreign exchange market and fluctuating oil revenues. The increase in remittance inflows not only provides much-needed foreign exchange liquidity but also contributes to the country’s broader economic resilience.
The CBN’s report also highlights a slowdown in Nigeria’s year-on-year headline inflation rate, marking the first decrease in 19 months. This development signals the effectiveness of the CBN’s monetary policy tightening measures, which have been aimed at curbing inflation and stabilizing the economy.
The increase in remittance inflows plays a complementary role in these efforts by boosting the supply of foreign currency, which can help ease inflationary pressures linked to exchange rate volatility.
However, these reforms and the uptick in remittance inflow, have failed to boost the naira’s value in the forex market. The naira traded at N605 per dollar in the parallel market on Tuesday.
Looking ahead, the CBN has expressed its commitment to closely monitoring market conditions and adjusting its policies as necessary to maintain the flow of remittances and ensure the stability of the foreign exchange market.