Leveraging Remittances for Nigeria’s Economic Growth

0

As the latest data released by the World Bank confirms Nigeria’s position as the top recipient of remittances in Sub-Saharan Africa, revenue authorities and stakeholders should intensify their collaboration with the Central Bank of Nigeria (CBN) to boost the flow of remittances to the country, writes TONY. CHUKWUNYEM

As part of “The Davos Agenda” last year, the World Economic Forum (WEF) published an article titled: “Remittances are key to recovery in developing countries”, written by Special Adviser of Western Union’s board of directors, Hikmet Ersek. The article describes diaspora populations as the world’s “economic first responders”, adding that “the money they send across the world’s borders has helped to mitigate the economic shocks of the pandemic, fostering resilience and a stronger recovery in their countries of origin throughout 2020 and into 2021 and beyond, which would have been the case without these flows. He said: “Remittances provide an essential lifeline to their home communities by financing basic necessities, alleviating extreme poverty and supporting healthcare and education. “They serve on the frontlines within their host communities as doctors, scientists, grocers, bus drivers, construction workers, teachers, and contribute human capital for the functioning of a robust economy. “These actions, during an unprecedented global pandemic, serve to shine even more of a spotlight on the criticality of remittances and those who send them. They are the resilient and inclusive global economic force. “Policymakers, development experts and economists must give cross-border remittances the consideration and priority they deserve as an important global economic driver. There has simply never been a greater need for innovation and technology that provides the on-the-ground financial support that instantly crosses borders.

1.7 million migrants

With 1.7 million migrants from Nigeria in the diaspora in 2020, according to the United Nations Department of Economic and Social Affairs (analysts believe the Nigerian diaspora is likely larger than officially captured), numerous studies consistently show that the country ranks as one of the top recipients of remittances in the developing world. For example, in its “Migration and Development Brief” published on May 12, the World Bank said that remittances from Nigerians in the diaspora increased by 11.2% to $19.2 billion in 2021, compared to $17.21 billion the previous year. The report, which also indicates that remittances jumped 14.1% to $49 billion in sub-Saharan Africa in 2021, “more than erasing the 8.1% decline recorded the previous year and representing the largest gain since 2018,” pointed out that the significant increase in remittance flows to the region last year was the result of a “restoration of recorded flows to Nigeria.” Furthermore, the World Bank report also showed that Nigeria ranked eighth on the list of top 10 recipients of remittances among low- and middle-income countries (LMICs) in 2021, below countries such as India, Mexico, China, Philippines, Egypt, Pakistan and Bangladesh. The report states: “Remittances are a major source of external financing for LMICs, compared to foreign direct investment (FDI), official development assistance (ODA) and portfolio investment. “In the recessionary year 2020, remittances showed resilience and were the main source of international finance for developing countries, with FDI falling by 12% due to lower global activity. Excluding China, the largest recipient of FDI, remittances have been the largest source of external finance for LMICs since 2016 and have measured about three times the size of ODA for over a decade. He further said that the near-record growth in remittances to LMICs last year was mainly due to migrants wishing to send money to support their families facing hardship in their country of origin, adding that the ability of migrants to send remittances was, in turn, enabled by strong economic growth. activity and employment levels in many large host countries that have implemented fiscal stimulus programs. The report predicts that remittance flows to (PRITI) will increase by 4.2% to reach $630 billion in 2022, while those to sub-Saharan Africa will increase from $49 billion in 2021 to $53 billion. dollars. Clearly, Nigeria is expected to attract more than two-thirds of projected remittances to the region. In fact, The New Telegraph’s analysis of World Bank reports on migration and development over the past five years indicates that the Nigerian diaspora remitted a total of $106.58 billion between 2017 and 2021. Specifically, the data shows that Diaspora Nigerians remitted $22.04 billion, $24.32 billion, $23.81 billion, $17.21 billion and $19.2 billion in 2017, 2018, 2019 , 2020 and 2021 respectively.

Boosting Diaspora Remittances

Thus, industry watchers were not entirely surprised when, as part of its efforts to reduce the country’s dependence on crude oil export earnings, the Central Bank of Nigeria (CBN ), following the economic crisis triggered by COVID-19, began looking for alternative sources to increase the country’s foreign exchange earnings through diaspora remittances. For example, in November 2020, the apex bank announced that recipients of diaspora remittances through International Money Transfer Operators (IMTOs) would receive these inflows in foreign currency (US dollars) through the designated bank of their choice. He said then that “these changes are necessary to deepen the foreign exchange market, provide more liquidity and create more transparency in the administration of diaspora remittances in Nigeria. “Furthermore, these changes would help fund a future flow of investment opportunities for Nigerians in the Diaspora, while ensuring that beneficiaries would receive a market-reflecting exchange rate for their inflows. “Recipients will have unfettered access and use of these foreign currency products, either in cash or in their domiciliary accounts.” As part of measures to ensure strict compliance with the policy, the CBN a few days later ordered banks to close all naira ledger accounts opened to receive proceeds from IMTOs. It also issued another circular reminding IMTOs that they must ensure that all funds in favor of beneficiaries/recipients in Nigeria are deposited in the correspondent account of the agent banks. The regulator emphasized, “Agent banks (custodian banks) in Nigeria will be responsible for all payments to beneficiaries/recipients either in cash in foreign currency (USD) or to the beneficiary/recipient’s domiciliary account in Nigeria. The method (whether payment in cash or by transfer is at the sole discretion of the beneficiaries/recipients).

Naira-4-Dollar Policy

In addition, the CBN on March 5 last year introduced the “Naira-4-Dollar” policy, which it said was aimed at boosting official channels of diaspora remittances and increasing inflows. currencies. Specifically, as part of the policy, the apex bank has introduced a rebate of 5 naira for every dollar of funds remitted to Nigeria through International Money Transfer Organizations (IMTOs). As the banking sector watchdog stated at the time, “these changes are necessary to deepen the foreign exchange market, provide more liquidity and create more transparency in the administration of diaspora remittances. “Furthermore, these changes would help fund a future flow of investment opportunities for Nigerians in the Diaspora, while ensuring that beneficiaries would receive a market-reflecting exchange rate for their inflows.” He pointed out that “beneficiaries will have unimpeded access and use of these foreign currency products, either in cash or in their domiciliary accounts. Commenting on the initiative at the time, CBN Governor Mr. Godwin Emefiele had said, “In an effort to reduce the cost of remittance transfer to Nigeria by Nigerian workers in the diaspora, the Central Bank of Nigeria has introduced a rebate of N5 for every dollar of remittances sent to Nigeria. in Nigeria, through IMTOs approved by the central bank. “We believe this new measure will help make the process of sending remittances through formal banking channels cheaper and more convenient for Nigerians in the Diaspora.” Similarly, at the end of April last year, the apex bank approved 10 new IMTOs, bringing the number of such companies licensed to operate in the country to 57 at the time. It also extended the Naira-4-Dollar policy, which was originally to apply from March 8 to May 8, 2021, indefinitely.

Success

While critics remain skeptical of the policy, a non-executive director/member of CBN’s Monetary Policy Committee (MPC), Professor Mike Obadan, told attendees of a two-day seminar organized by CBN for financial correspondents and business writers in March this year that the Naira-4-Dollar scheme had been very successful in attracting remittances from the Diaspora. He said, “During COVID-19, remittances from the diaspora averaged six million dollars per week, but now they are registering around $100 million per week. The amount of foreign currency entering the country through remittances has skyrocketed. “When we look at the numbers of domiciled accounts held by commercial banks, the total numbers have skyrocketed, so this is a good policy designed to attract flows from our own citizens abroad,” Obadan added.

Conclusion

However, the consensus among analysts over the weekend was that the Nigerian authorities should also heed the advice the World Bank gave to the LRICs in its latest report. The multilateral development lender said that “the application of risk-based, proportionate and simplified anti-money laundering and counter-terrorist financing (AML/CFT) procedures for small remittance transactions as well as customer due diligence (CDD) and AML/CFT compliance processes could help reduce remittance costs and leverage diaspora investment.

TRY TONIGHT!!! —

Abuja Official Reveals Secret Fruits (FREE) That Increased His Size Manh0d, Gives Stronger Erections & Ends Premature Erection In 7 Days…

Share.

Comments are closed.