The Central Bank of Nigeria (CBN) has announced a new forex policy designed to encourage diaspora remittance through Money Deposit Banks (MNOs) that will fuel dollar liquidity in Nigeria.
The initiative tagged, ‘Naira 4 Dollar Scheme’ for diaspora remittances, offers recipients of diaspora remittances through CBN’s International Money Transfer Operators (IMTO)s, N5 for every $1 received as remittance inflow.
The scheme takes effect from Monday, March 8, 2021, and ends on Saturday, May 8, 2021.
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The scheme was disclosed by CBN in a circular which was dated March 5th, 2021, and signed by the Director, Trade and Exchange Department, A.S Jibrin, issued to all DMOs and IMTO. The circular reads in part:
“In an effort to sustain the encouraging increase in inflows of diaspora remittances into the country, the Central Bank of Nigeria (CBN) hereby announces the introduction of the “CBN Naira 4 Dollar Scheme”, an incentive for senders and recipients of international Money Transfers.
Accordingly, all recipients of diaspora remittances through CBN licensed IMTOs shall henceforth be paid N5 for every USD1 received as remittance inflow.
In light of this, the CBN shall, through commercial banks, pay to remittance recipients the incentive of N5 for every USD1 remitted by sender and collected by designated beneficiary. This incentive is to be paid to recipients whether they choose to collect the USD as cash across the counter in a bank or transfer same into their domiciliary account.
In effect, a typical recipient of diaspora remittances will, at the point of collection, receive not only the USD sent from abroad but also the additional N5 per USD received. Please note having discussed with banks and IMTOs, the scheme takes effect from Monday 8 March 2021 and ends on Saturday 08 May 2021.”
The CBN governor Godwin Emefiele said the move is to encourage Nigerians in diaspora to “increase the volume of global remittances,” “reduce rent-seeking activities” and offer “cheaper” and more “convenient remittance process” to Nigerians in diaspora.
He said the success of the scheme for the designated 60 days will determine whether it will be continued.
Emefiele said these in a webinar hosted by Fidelity Bank on Feb. 6, titled: “The New FX Policy, Implications and Positive Impact on Diaspora Investment,” which was graced by the Vice President Prof. Yemi Osinbajo who was represented by Yewande Sadiku, Prof. Wale Sulaiman, Chairman and CEO RNZ Global, Prof. Ndubuisi Ekekwe of Tekedia Institute among others.
“We believe that this new policy will encourage banks and financial institutions to develop products and investments vehicles geared toward attracting investments from Nigerians in the diaspora,” Emefiele said.
He explained that the newly introduced CBN FX policy is expected to enlarge the scope and skill of foreign exchange inflow into the country with a view to stabilizing the exchange rate, supporting external reserve, and more importantly, helping Nigerians living abroad to invest in their home country.
While the new policy is largely applauded, others believe that Nigeria needs more than that to prosper as a nation.
In his position titled: The New CBN FX Policy: The Path to $2 Trillion GDP, Prof. Ekekwe said Nigeria must transit from inventive nation to innovative nation to grow a GDP that will accommodate its exploding population.
While he applauded the new CBN FX policy, describing it as “catalytic”, Prof. Ekekwe said Nigeria needs more than diaspora remittance, which is pegged at $23 billion, to move to the mountain top.
“Our nation Nigeria has knowledge, from that angle; we have the necessary rudiment for us to move from inventive society to innovative society,” he said. “There is also that entrepreneurial capitalism. Across the nation, we have young people who are risk takers who can take us into that mountain top, if we give them the necessary capabilities and the things they need to make that translation.”
He explained that by exporting her best brains, Nigeria is trading $23 billion diaspora remittance for $2 trillion economic value that she could have captured through the development of innovative ideas of Nigerians living in diaspora.
Prof. Ekekwe said Nigerians in diaspora need to do more than remit money back home through investments since the value of their innovations is being captured by their countries of residence. He urged the government to, among other things; introduce incentives that will attract investment from Nigerians living abroad.
Prof. Ekekwe proffered “Diaspora Growth Nation’s Fund,” a sort of capital that will be designated for innovative investments in Nigeria.
“If we do not have capital, Nigeria cannot transition from inventive society to innovative society, because capital is very necessary for us to build the necessary things we need as a nation,” he said.
However, critics said the central bank has introduced the new FX policy to discourage Nigerians in diaspora from making remittances through cryptocurrency, which recently, has become the preferred choice of remittance for many Nigerians living abroad due to its cheap and flexible process.
The apex bank had in Feb. 5, directed all regulated financial institutions in Nigeria to halt cryptocurrency transactions, citing its use for money laundering among other reasons.