- CBN guidelines on diaspora remittances ought to have come a long time ago
With its latest Amendment to Procedures for Receipt of Diaspora Remittances, the Central Bank of Nigeria (CBN) has certainly moved full cycle in the attempt to manage a segment that continues to be opaque and unamenable to its monetary policy control. Under the new policy, beneficiaries of foreign funds transfer shall have unfettered access to and utilisation of such foreign currency proceeds, either in foreign exchange cash and/or in their Domiciliary Accounts.
Before now, the beneficiaries of in-bound transfers could only collect in the local currency.
The apex bank reckons it will help to “deepen the foreign exchange market, provide more liquidity, and create more transparency in the administration of Diaspora Remittances into Nigeria.”
It argues further that the “changes would help finance a future stream of investment opportunities for Nigerians in the Diaspora, while also guaranteeing that recipients of remittances would receive a market-reflective exchange rate for their inflows”.
To underscore its seriousness, it mandated all Deposit Money Banks (DMBs) to close all Naira General Ledgers through which the local currency remittances were hitherto being carried out.
To begin with, the latest measure indicts itself, particularly since none of its so-called measures is new. Indeed, the CBN has come late to the party, given the long history of criticisms of the old order. At its heart, a diaspora receiving agent/bank after collecting appropriate charges and commissions on the transferred funds, are still allowed to keep the forex proceeds. They paid the beneficiary in the local currency, thereby denying the country the benefit of the hard currency and robbing the beneficiary of the choice that would have delivered fair exchange value to him at the same time.
Much as we would have loved to laud the apex bank for the measure, it is certainly not hard to detect some tinge of panic underlying it. No thanks to COVID-19 and the associated meltdown in the economy, the rate of forex accretion slowed down considerably, just as the naira has come under intense battering from the activities of speculators. And now, like the once rejected stone, the option of diaspora remittances has suddenly become attractive as a veritable source of forex to the CBN.
Had the apex bank been more far-sighted, it seems doubtful that things would have come to this. In other words, would the apex bank have found the measure necessary had the COVID-19 and the associated disruptions not taken place? Put in another way, is there something that the CBN has suddenly discovered about the remittances or its management that was not there before? Why is the CBN only now waking up to the realisation that the beneficiaries of the transferred funds are being short-changed via the non-competitive rates forced on them?
Surely, if the latest measure by the apex bank is any reflection of how the system of international monetary transfer has morphed with the tide of exogenous developments since the International Money Transfer Operator (IMTO) first came on board in 1996, that the apex bank has not gone beyond such episodic responses to a matter that touches fundamentally on the health, well-being and the financial stability of the country can only be explained by a grave flaw of dereliction – a measure of how the apex bank is light years behind in matters that touch on its mandate.
We are referring here to annual remittances in excess of $20 billion. (The Migration and Development Brief 33 published by the World Bank and the Global Knowledge Partnership on Migration and Development, puts the projected remittances for this year alone at $21.7 billion– some $2 billion short of the $23.8 billion recorded in 2019).
It is hard to imagine such quantum inflows failing to make visible impact in terms of buoying the reserves and lifting the value of the naira. That it is not happening must be seen as one of failure of policy.
For, if the truth must be told, the issue as well as the ensuing debate on it goes a while back. Indeed, we recall a one-time Minister of Finance, Etubom Anthony Ani, once decrying what he saw as the collusion between Nigerian banks and Western Union/MoneyGram, whereby the former pays from their excess naira liquidity while the latter retains the dollars abroad. Describing the practice as being “against the law which provides that all remittances must be brought into Nigeria in foreign currency via domiciliary account”, he had then called for the investigation of the infraction, punishment for the money launders, and recovery of all past diaspora remittances retained abroad! Coming from a quarter that should ordinarily know, it is most regrettable that the call was roundly ignored. The result, as we have seen, is that the nation has not only turned full cycle, those concerns highlighted by the minister have finally been borne out by the very measure rolled out by the apex bank.
Yes, we welcome the new procedure. Truly, it does offer some comfort to beneficiaries of the transferred funds, not least the nation’s reserves, which will most certainly be buoyed. It is however not sufficient for the apex bank to simply decree a new slate as it were; there has to be deliberate steps to establish what has gone wrong, to know who and who have profiteered at the expense of the nation’s well-being, and where what should ordinarily have been an in-bound forex inflow ended up.
More than the current strident attempt to push some nebulous justifications for a measure which from every appearance speaks directly to common-sense, the nation deserves a more convincing explanation for what it now admits as being wrong with the extant practice in the years gone by. Only after the truth of all that happened is established can we expect to draw useful and enduring lessons from them. The point bears making that the country can no longer afford a system which puts the narrow interests of bankers, their cohort of traders and currency manipulators first, while leaving the real sector in a terrible state. It’s high time the CBN reversed the trend.
