Central Bank of Nigeria (CBN) Governor, Mr. Godwin Emefiele, yesterday highlighted the benefits of the newly introduced “CBN Naira 4 Dollar Scheme,” an initiative aimed at incentivising senders and recipients of international money transfers. Emefiele spoke at a webinar organised by Fidelity Bank Plc, entitled, “The New FX Policy, Implications and Positive Impact on Diaspora Investments,” where he delivered a keynote speech.

The CBN governor explained that the new policy was expected to attract diaspora remittances through the official foreign exchange channels as well as support forex stability in Nigeria.

The CBN had earlier in a circular dated March 5, 2021, signed by A.S. Jibrin, on behalf of the Director, Trade and Exchange Department, and released yesterday, stated that the new initiative would become effective on Monday and Saturday, May 8, 2021. In line with this initiative, all recipients of diaspora remittances through CBN’s licensed International Money Transfer Operators (IMTOs) shall henceforth be paid N5 for every $1 received as remittance inflow.

The apex bank explained in the circular,

The CBN shall through commercial banks, pay to remittance recipients the incentive of N5 for every $1 remitted by sender and collected by the designated beneficiary.

This incentive is to be paid to recipients whether they choose to collect the United States dollar 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.

Providing more insight into the new policy, Emefiele said it would offer Nigerians in the diaspora a convenient way to send remittances, adding that it would also aid diaspora investments.

He explained,

Our policy on the administration of remittance flows is aimed at increasing the transparency of remittance inflows, reducing rent-seeking activities, and providing Nigerians in the diaspora with cheaper and more convenient ways of sending remittances to Nigeria.

In addition, we believe that this new policy measure will encourage banks and financial institutions to develop products and investments vehicles geared towards attracting investments from Nigerians in the diaspora. We have no doubt that these changes can help to finance a future stream of investment opportunities for Nigerians living abroad.

However, Emefiele said,

Yet, the introduction of the new policy presented new challenges, as operators and remittance service providers were initially unable to integrate with the agent banks.

He said the central bank would continue to work to resolve the intermittent interface challenges in the marker.

Emefiele disclosed that the average cost of sending $200 worth of remittance to Nigeria from the US was about 4.7 per cent, saying studies have shown that even a one per cent decrease in cost of sending remittance can result in a significant boost in inflow.

He added,

Countries in South Asia, such as Pakistan and Bangladesh, are aware of this impact and they introduced reimbursement schemes to support inflows.

In Pakistan, the scheme, which is known as free send, has enabled record amount of inflows of over $2 billion a month even during the COVID-19 pandemic. Bangladesh introduced its own scheme in June 2019, which is a two per cent rebate on remittance inflows. Following this action, they have also seen a 20 per cent boost in remittance inflows.

On the topic of round tripping, there is a maximum amount that you can remit through an IMTO. You can’t send a $100,000 through an IMTO. The CBN’s action, while it does not go far enough in offering total reimbursements, is a step in the right direction in reducing the cost burden for Nigerians remitting funds to Nigeria.

Emefiele also disclosed that the central bank had been engaging the IMTOs and the banks to ensure more convenience in fund remittance. He highlighted the importance of diaspora inflows to the economy, saying the country would be in a position to reap its benefits if remittance infrastructure improves.

He explained,

Furthermore, in an effort to reduce the cost burden of remitting funds to Nigeria by working Nigerians in the Diaspora, the Central Bank of Nigeria has introduced a rebate of N5 for every $1 of fund remitted to Nigeria, through IMTOs licensed by the central bank. This rebate will be provided to the bank accounts of beneficiaries, following receipt of remittance inflows.

We believe this new measure will help to make the process of sending remittance through formal bank channels cheaper and more convenient for Nigerians in the diaspora. This new policy is expected to take effect on the 8th of March 2021.

Accordingly, the CBN strives to constantly improve our remittance infrastructure, ease the process of international money transfer and simplify the experience for senders and recipients. In this regard, we note that the efficiency of remittance services, especially as provided by the IMTOs are critical to our aim of boosting inflows. We would constantly seek to fine tune our policies to mitigate factors that affect the quality-of-service customers face when using IMTOs.

Other speakers at the webinar included the vice president, Professor Yemi Osinbajo; President of AfreximBank, Professor Okey Oramah; Chairman, Nigerians in Diaspora Commission (NIDCOM), Abike Dabiri-Erewa; and Chief Executive Officer, Fidelity Bank, Nneka Onyeali-Ikpe.

Osinbajo commended the new FX policy, saying it would aid more investment from Nigerians living abroad. The vice president, who was represented by Executive Secretary/Chief Executive Officer, Nigerian Investment Promotion Commission (NIPC), Ms Yewande Sadiku, stated,

Nigerians in diaspora represent an indomitable force, they are flag bearers of Nigeria’s image, Nigeria entrepreneurial energy and Nigeria’s incredible can-do attitude. In business, politics, education, sports, entertainment, science, medicine, and arts, Nigerians have demonstrated across the world what Nigerians represent in Nigeria. We realise the role of the diaspora and the potential that they represent.

For several years, the remittances from Nigerians in diaspora exceeded Nigeria’s oil revenues, which translated sometimes as high as six per cent of GDP. We are interested in understanding exactly how to translate this potential to investments.

So, the office of the VP working with stakeholders, including NIPC, worked on a study and we found that many Nigerians, particularly first-generation males, have a keen interest in investing in their country.

Osinbajo added,

We noticed that 70 per cent of remittances go into family support and only 30 per cent of the inflows go into investments and in that 30 per cent, a bulk of it goes into real-estate.

But what Nigerians in the diaspora indicated would be useful for them is to undertake more investments into Nigeria in specific engagements that promote investment opportunities led by the private sector. From government, what they asked for was improvement in the enabling business environment.

The effort of government in recent years has been on improving the business environment and initiatives, such as this, driven by the private sector, to attract investment from the diaspora is one of the key things they asked for.

We are delighted with the new CBN policy that makes it easier for diaspora Nigerians not just to transfer funds to Nigeria but to have greater control over the funds they transfer to Nigeria. And I know that when statistics would be released, we would see the material impact it would have had on the diaspora remittances from Nigerians to Nigeria.

Speaking at the webinar, Oramah commended the CBN governor for the reforms taking place with regard to diaspora remittances. He suggested ways to boost diaspora participation in the Nigerian economy through specialised funds and accounts that would encourage them to save their long-term funds in Nigeria.

He said,

Africans and Nigerians can consider allowing special diaspora foreign currency accounts with higher interest rates than the US or Europe and with an inbuilt guarantee against potential losses from bank failures and country risks.

Afreximbank would be happy to work with authorities to put in place a country risk guarantee that can be retailed to diasporas depositing money in such foreign currency account. We have done something similar in Zimbabwe.

Secondly, designated commercial banks may be encouraged to implement diaspora targeted certificates of deposits that can be liquidated in local currencies or foreign currencies with built in incentives to encourage liquidation in local currencies.

Thirdly, is a properly structured diaspora fund that can be issued with eligible bond holders encouraged to open coupon payment accounts locally in Nigeria to enable them cover local expenses and support their relatives at home.

Oramah stated that by creating the requisite environment, the diaspora could become a catalytic force that would break the development barriers and rapidly transform the country and the continent.

The chief executive officer of Fidelity Bank, in her own remarks, said the new remittance policy was well intentioned.

She stated,

As part of measures to promote transparency and grow diaspora remittances, which would, obviously, improve forex inflows into Nigeria, the CBN recently introduced new FX policies.

We, as a bank, are in full compliance with the policy and we are working with about 17 already registered International Money Transfer Operators to ensure that they are in full compliance with the modalities that have been stated by the government.

The effort by the CBN to increase liquidity in the FX market through this new policy on diaspora remittances is well intentioned and that is why we decided to host this seminar today to deepen peoples understanding of this policy and the impact.

Justin Nwosu

Justin Nwosu is the founder and publisher of Flavision. His core interest is in writing unbiased news about Nigeria in particular and Africa in general. He’s a strong adherent of investigative journalism, with a bent on exposing corruption, abuse of power and societal ills.