- Despite claims by the Central Bank of Nigeria that diaspora remittances jumped 1,566.6%, Nigeria’s foreign exchange reserves are rapidly shrinking
- Diaspora remittances make up a significant portion of the CBN’s daily dollar earnings, which are used to augment external reserves
- According to the CBN, remittances from the diaspora have increased from $6 million per week to $100 million since the launch of the Naira-dollar promotion.
The Central Bank of Nigeria recently claimed that remittances from the Nigerian Diaspora have increased significantly since the introduction of the Naira4Dollar scheme.
Godwin Emefiele, Governor of the Central Bank of Nigeria (CBN), explained why while addressing reporters after the Bankers Committee held in Abuja, Thursday, February 10, 2022, Nairametrics reports.
However, the data did not substantiate this claim because Nigeria’s reserves, which remittances from the diaspora must increase, are running out so quickly.
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The Nigerian currency Naira which is believed to be the biggest beneficiary of 1,566.6%, the increase in Diaspora remittances continues to lose its value.
Data shows no impact
Data from the Obtained CBN website shows that Nigeria’s external reserves have shrunk to $39.87 billion as of February 10, 2022.
This is the lowest level since October 29, 2021, when it stood at $41.82 billion, representing a decline of 4.66%.
The depletion of reserves comes as the CBN continues to inject dollars into commercial banks and the official foreign exchange market to meet demand and prevent the naira from depreciating further.
On Monday, February 14, 2021, the Naira/Dollar exchange rate closed at N430.00/USD amid CBN’s weekly injections of $210 million.
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CBN says Nigerians abroad increased dollar remittances from $6m to $100m per week
On March 8, 2021, the CBN introduced the $4 Naira scheme as an incentive to boost the inflow of Diaspora remittances into the country and Nigeria’s external reserves.
The principle of the program states that for every dollar sent home by a Nigerian abroad, there is an N5 gift, according to Ripples Nigeria report.
At the Bankers Committee, Emefiele said:
“Before the promotional deposit money banks, the country’s International Money Transfer Operators (IMTOs) were processing $6 million a week, but the figure has risen to $100 million a week.”
So, for $1 million sent home, the sender receives 5 million naira in return.
Weekly remittances of $100 million will attract 500 million naira while 1 billion naira in 2 weeks will attract a reward of 2 billion naira in a month.
The expert speaks
In response to the increased flow of remittances, Taiwo Oyedele, head of tax and corporate advisory services at PwC, told BusinessDay that comparing current weekly remittances of $100 million to around $6 million dollars at the height of the pandemic does not paint an accurate picture. situation.
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“We should instead compare the current level of remittances to the pre-pandemic period and also ask whether the improvement so far is simply a transfer between remittance channels rather than an increase in inflows. .
In any case, he said, the overall inflows of foreign exchange into the country from all sources are still below the country’s demand, hence the sustained pressure on the external reserve and, consequently, the relative value of the naira.
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Meanwhile, Obadiah Mailafia, former deputy governor of the Central Bank of Nigeria (CBN), criticized the apex bank’s decision to stop supplying currency to money changers.
Mailafia said the decision could weaken the value of the naira against the dollar and other foreign currencies as there could be a shortage of currency.
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Based on his experience of the Nigerian banking system, Mailafia said banks could hoard foreign currency for themselves and sell at high cost to buyers whenever lenders want it.