The Central Bank of Nigeria (CBN) on Saturday introduced a new incentive to encourage inflow of diaspora remittances.
The incentive, tagged “Naira 4 Dollar Scheme”, was announced in a circular signed by Saleh Jibrin, CBN ‘s Director, Trade and Exchange Department.
Jibrin said that the scheme, which would run between March and May, would allow all recipients of diaspora remittances to be paid N5 for every one dollar received.
He said that beneficiaries would get the incentive, whether they collect the remitted dollars as cash across the counter or through their domiciliary accounts.
He instructed all commercial banks and International Money Transfer Operators (IMTOs) to ensure that the scheme takes effect from Monday.
“In an effort to sustain the encouraging inflows of diaspora remittances into the country, the CBN hereby announces this scheme as an incentive for senders and recipients of international Money Transfers.
“All recipients of diaspora remittances through CBN licensed IMTOs shall henceforth get N5 for every one US dollar received.
“This incentive is to be paid to recipients whether they choose to collect the dollar as cash across the counter in a bank or transfer same into their domiciliary account.
“Having discussed with banks and IMTOs, the scheme takes effect from Monday March, 8 and ends on Saturday May, 8,” he said.
Reacting, a former President, Association of National Accountants of Nigeria, Dr Sam Nzekwe, said this latest move would encourage people to patronise government licensed money transfer operators as opposed to the agents that could not be easily monitored.
It would also ensure that more forex was remitted into the country, he noted.
He said, “Nigeria does not even know how the economy is surviving; the economy is surviving through all these informal operators, those doing informal transfers.
“A lot of money is coming from abroad but going through the government licensed operators is cumbersome. They should make it easy through the licensed operators.”
Nzekwe added, “It will help to boost remittances. All hands must be on deck to ensure we harness foreign currencies into the country.”
A professor of economics at the Olabisi Onabanjo University, Sheriffdeen Tella, said, “It wont have any major impact on Diaspora remittances.
“The first thing is that the amount (N5) is too small to attract those living abroad to start sending money home. Don’t forget that these people also have their plans.
“Secondly, it may not be able to save the naira from the current slide. The reason is that production is picking up now and most of production needs foreign inputs. So, people will spend dollars to do more imports. Also, we have not been able tackle illicit financial flows.”
Similarly, the Chairman of Foundation for Economic Research and Training, Prof Akpan Ekpo, said the new scheme introduced by the CBN was aimed at tackling dollar scarcity in the country by encouraging the inflow of the greenback.
Ekpo, a former director-general of the West African Institute for Financial and Economic Management, said, “I think it is just to encourage the inflow of dollars so that they can reduce the amount of naira needed to buy the dollar. Now, the naira has depreciated officially to 410/$1; it is about 480/$1 in the black market. That gap is still wide; so, the CBN is trying to narrow the gap.
“The only way we can boost forex supply is to diversify the economy – build a complex industrial economy where we earn forex outside of oil. That is the only way we can boost forex supply, not the way we are going.”
But he said while the impact of the CBN policy on the Nigerian economy would be marginal, it would not save the naira from sliding down further.
Ekpo explained, “That is the idea – to see whether they can stop the depreciation. Whether that will happen, I don’t think that will happen in the short term. The impact on the economy will be very marginal. The idea is that they want to bring in more dollars because if you stabilise the exchange rate, you will restore confidence in the economy and hopefully, if you restore confidence, you might encourage an inflow of foreign direct investment. That’s the whole idea.”
On the impact of the rebate on annual diaspora remittance, he said the inflow had been increasing as Nigeria has one of the largest in Africa.
He said, “We don’t know (whether the new policy will increase diaspora remittance); let’s see what happens before six months because the only way you can increase dollar supply is for the country to produce and export non-oil (commodities), not just crude oil only. If it’s crude oil alone, we are earning a lot of revenue from oil, but still we have a problem with the dollar.
“So, the only way is to be an economy that produces and exports non-oil to earn foreign currency, meaning that the economy has to be diversified to do that.”
An economist and Senior Lecturer, Lagos Business School, Dr Bongo Adi, applauded the central bank for the policy, noting that it could leapfrog the economy.
He said this was part of the innovations and proactive incentives that was expected from the bank and cited India as an example of a country that leveraged diaspora remittances to transform her economy and escape the poverty trap.
He said, “Diaspora remittances are at the heart of Nigeria’s economy. We can leverage our huge constellation of Nigerians spread all over the world. If we give them incentives they will bring back their talents and capital back to the country.
“Many Nigerians are high earners so when they begin to remit some of their capital back home, that is all Nigeria needs to transform.
So any incentive that could get them to get more of those funds down here is of course a welcome development.”
The Director-General, Lagos Chamber of Commerce and Industry, Dr Muda Yusuf, said the ‘CBN Naira 4 Dollar Scheme’ would increase the annual diaspora remittance and save the naira from its current slide.
He, however, added that the apex bank should allow exporters free access to their export proceeds.
He said, “The CBN deserves to be commended for this policy. It is a laudable move to encourage forex inflows and ease the current liquidity challenges in the forex market. This would surely have a positive impact on inflows and ultimately on the exchange rate.
“But the CBN should go a step further by allowing exporters unfettered access to their export proceeds, whether in foreign exchange or naira. The current practice of imposing the NAFEX rate on export proceeds should be discontinued in the spirit of the current move to incentivise forex inflows.
“Similarly, Foreign Direct Investments and Foreign Portfolio Investments should be allowed greater flexibility in conversion rates of their inflows. A combination of these strategies would have a remarkable impact on foreign reserves, forex liquidity and the naira exchange rate.”
Also, a businessman, Mr Jimoh Ibrahim, described the policy as one that had the capacity to boost the value of naira against the dollar, given that there would be an increase in remittances from the diaspora.
He said, “The Central Bank will get more remittances from abroad and that would increase the foreign exchange that can strengthen the naira. The demand for foreign exchange is high and the Central Bank needs to meet the demand. So, this is also an alternative way of sourcing for an exchange.”
He however pointed out that there should be other ways of encouraging Nigerians abroad to remit forex, noting that the N5 incentive could only be significant when the volume is high.
He added, “I think the CBN can still achieve this by ensuring that remittances are done timely and speedily. That means if I remit money, I can get it very quickly. If the bottlenecks and bureaucracies are reduced, the N5 incentive would not be necessary and you would still attract a high volume of forex.
“The CBN should also avoid (asking certain) questions because the agencies there have done a lot of checks.”
Also, the Director-General, the Nigerian Association of Chamber of Commerce, Industry, Mines and Agriculture, Ambassador Ayo Olukanni, said the CBN must have taken the decision to harness the huge potential of foreign remittances.
He said if well implemented, the policy might boost foreign exchange and reduce the pressure on naira.
He added, “Properly implemented, I think it may have a positive impact on our modest exit from recession, boost our foreign exchange input and hopefully result in reduction of pressure on the naira.
“However, we are of the view that other areas which deserve attention in the quest to increase forex inflow is our non-oil export, which has yet to be fully tapped due to reasons we all know. We hope to see appropriate incentives to boost foreign exchange by scaling up our non-oil exports as we grapple with what should be done to ensure inflow of forex and shore up the naira.” – Vanguard, Punch.