Despite CBN Claims Of $100m Weekly Diaspora Remittance, Nigeria Foreign Reserves are Depleting Very Fast

Despite CBN Claims Of $100m Weekly Diaspora Remittance, Nigeria Foreign Reserves are Depleting Very Fast

  • Despite the Central Bank of Nigeria's claims that diaspora remittances have surged by 1,566.6%, Nigeria's foreign reserves are decreasing rapidly
  • Diaspora remittances account for a sizable portion of the CBN's daily dollar receipts, which are utilised to increase external reserves
  • According to the CBN, diaspora remittances have surged from $6 million weekly to $100 million since the launch of the Naira-to-dollar promo

The Central Bank of Nigeria recently claims that Nigeria diaspora remittance has jumped significantly since it introduced the Naira4Dollar Scheme in March 2021.

Godwin Emefiele, governor of the Central Bank of Nigeria (CBN), made this why speaking with Journalists after the Bankers committee held in Abuja, on Thursday, February 10, 2022, Nairametrics reports.

However, data has failed to justify the claim as Nigeria's reserves which the diaspora remittance is to boost, is depleting so fast.

The Nigerian currency Naira which is supposed to be the biggest beneficiary of the 1,566.6%, increased diaspora remittance continue to lose its value.

Despite CBN claims of $100m weekly diaspora remittance, Nigeria foreign reserves are depleting very fast
The depletion of Nigeria's foreign reserves from December to date Credit: CBN
Source: Facebook

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Data fails to show any impact

Data from obtained CBN website shows that Nigeria's external reserves have declined 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 4.66 per cent decline.

The depletion of the reserves comes as CBN continues to pour in dollars to the commercial banks and official foreign exchange market to meet demands and save Naira from further depreciation.

On Monday, 14 February 2021, Naira/ dollar exchange rate closed flat at N430.00/USD amid CBN's weekly injections of $210 million.

CBN could be spending 20 billion monthly as a rebate

On March 8, 2021, the CBN introduced the Naira 4-dollar scheme as an incentive to boost inflows of diaspora remittances into the country and Nigeria’s external reserves.

The scheme's principle states that for every dollar sent home by a Nigerian abroad, there is N5 gift, Ripples Nigeria report shows.

At the banker's committee, Emefiele said:

"Before the promo deposit money banks, International Money Transfer Operators (IMTO) in the country processed $6 million per week but the figure has jumped to $100 million weekly.”

So therefore, for $1 million sent home, the sender gets N5 million in return.

$100 million weekly remittances will attract N500 million while N1 billion in 2 weeks will attract a reward of N2 billion in a month.

Expert speaks

Responding to the rising remittances flow, Taiwo Oye- dele, head of Tax and Corporate Advisory Services at PwC, told BusinessDay that comparing the current $100m weekly remittances to about $6m at the height of the pandemic does not give an accurate picture of the situation.

He said:

"We should rather compare the current level of remittances to the pre-pandem- ic period and also interrogate whether the improvement recorded so far is merely a transfer between remittance channels rather than an increase in inflows.

In any case, he said the aggregate inflows of foreign exchange into the country from all sources still fall short of the country's demand hence the sustained pressure on the external reserve and consequently the relative value of the Naira.

CBN head criticises Emefiele's decision to ban BDC operators from selling forex

Meanwhile, Obadiah Mailafia, a former deputy governor of the Central Bank of Nigeria (CBN), has criticised the decision of the apex bank to stop providing foreign exchange to bureau de change operators.

Mailafia said the decision could weaken the value of the naira against the dollar and other foreign currencies, as there might be a scarcity of forex.

With his experience of the banking system in Nigeria, Mailafia said the banks might hoard forex for themselves and sell at a high cost to buyers whenever the lenders want.


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