- As stand-alone, it may not achieve desired result
On March 5, the apex bank introduced a new scheme tagged ‘Naira-4-Dollar Scheme’, said to be part of efforts to incentivise senders and recipients of international money transfer. The scheme, which runs from March 8 till May 8, will have all recipients of diaspora remittances through licensed International Money Transfer Operators (IMTOs) paid N5 for every $1 received as remittance inflows. The incentive, according to the Central Bank of Nigeria (CBN) “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 justifying the initiative, CBN governor Godwin Emefiele had explained that the model had not only been applied in the two South Asian countries of Pakistan and Bangladesh, but actually worked to support inflows. Whereas the Pakistan scheme known as free send, had, in his words, “enabled record amount of inflows of over $2 billion a month even during the COVID-19 pandemic”, that of Bangladesh, introduced in June 2019, which is a two per cent rebate on remittance inflows has “also seen a 20 per cent boost in remittance inflows.”
Coming some three months after a new policy that mandated banks to transfer all diaspora remittances to the domiciliary accounts of the beneficiaries or pay the customers in foreign currency, the apex bank obviously deserves some commendation, first, for its renewed focus on a segment whose potential is yet to be fully harnessed for national development and, second, for following up with such measures it considers necessary to optimise the benefits of the sector.
Having said that, the natural question is whether the initiative aspires to be any realistic solution to an identified problem, or a mere placebo put in place for the feel-good effect. Aside questions about the use of a promo by the regulator, there have been questions about whether the bonanza prize, set at N5 can trigger the kind of response that the CBN actually seeks, given that a huge chunk of the remittances are actually for consumption and other forms of domestic support. Bismarck Rewane, a renowned economist, puts diaspora inflows to Nigeria at between $5 million and $7 million per day, a figure that the apex bank thinks it can push to $30 million per day. Related is the practical implication of the bonanza which, in effect, comes basically to further devaluing the naira by the same token; and then also the potential for round-tripping by unscrupulous players – a factor that could neither be described as far-fetched nor unthinkable in our typically footloose financial landscape.
And finally, the real elephant in the room – the comparatively steep charges on remittances and the associated paperwork – and which explains the multiplicity of alternative channels currently in vogue and which the apex bank measure conveniently chose to ignore.
The apex bank has two months to find out whether or not it is actually barking up a wrong tree. For now, it is hard to see the measure deliver significant results without a fundamental change in our trade policy. At the heart of this is our dependence on foreign sources for goods, ranging from basic manufactures to industrial raw materials. Not only does it explain our insatiable hunger for foreign exchange, it lies at the heart of the endless manipulations of the national currency, of which the diaspora remittances is merely one of its many derivatives.
Of course, we need the CBN to track our diaspora remittances to ensure that the local economy derives maximum benefits. In the same vein, we need the Nigerians in Diaspora Commission, (NIDCOM) to rev up programmes and policies to bring our diasporans on board. Given the issues which the CBN admitted to as underlying the measure, there is certainly enough room for collaboration between the two agencies. In all however, the greater work of deepening and diversifying the economic base, to boost our exports while curbing needless imports- which is at the root of the problem – undoubtedly still lies with the Federal Government.
