Beneficiaries of diaspora remittances, who receive funds through licensed International Money Transfer Operators (IMTOs) will be paid N5 for every $1 received as remittances inflow by the Central Bank of Nigeria (CBN).
This was disclosed by CBN Governor, Mr. Godwin Emefiele, while making a speech at the Fidelity Bank’s inaugural diaspora webinar series in Lagos on Saturday.
Emefiele said the decision is, “an effort to reduce the cost burden of remitting funds to Nigeria by working Nigerians in the Diaspora.”
The CBN governor, who noted that the measure is part of new foreign exchange measures recently introduced by the apex bank to boost remittance inflows into the country, pledged that the regulator will continue to address factors that affect the quality of service customers receive when using IMTOs.
He stated: “In an effort to reduce the cost burden of remitting funds to Nigeria by working Nigerians in the Diaspora, the Central Bank of Nigeria has introduced a rebate of N5 for every $1 of fund remitted to Nigeria, through IMTOs licensed by the Central Bank.”
This rebate will be provided to the bank accounts of beneficiaries, following receipt of remittance inflows. “We believe this new measure will help to make the process of sending remittance through formal bank channels cheaper and more convenient for Nigerians in the Diaspora.
“This new policy is expected to take effect on March 8, 2021.” Continuing, he said: “Our policy on the administration of remittance flows is aimed at increasing the transparency of remittance inflows, reducing rent-seeking activities, and providing Nigerians in the Diaspora with cheaper and more convenient ways of sending remittances to Nigeria.
“In addition, we believe that this new policy measure will encourage banks and financial institutions to develop products and investments vehicles, geared towards attracting investments from Nigerians in the Diaspora.”
Noting that remittances are less volatile when compared to other forms of foreign investmentsuch as foreign portfolio investment, which could be prone to sudden reversals, and are influenced by external factors, such as changes in monetary policy by advanced countries.
The CBN Governor observed that the use of reimbursements of remittance fees had significantly helped in supporting improved inflow of remittances to countries in South Asia, such as Pakistan and Bangladesh, as well as improving their balance of payments position.
Specifically, he said: “In June 2019, the Bangladeshi government launched an initiative to pay a percentage of the total amount remitted to beneficiaries in Bangladesh.
“This scheme has helped to significantly improve remittance inflows. For example, between July 2019 and February 2020, Bangladesh received $12.5bn in inflows, reflecting monthly inflows of $1.5bn.
“Between July 2020 and February 2021, inflows using formal channels rose to $16.7bn reflecting average monthly inflows of $2.1bn per month notwithstanding the effects of the COVID- 19 pandemic on the global economy.”
According to Emefiele, contrary to expectations that the COVID-19 crisis would lead to a massive dip in remittances to emerging and frontier markets as a result of the slowdown in global growth in the first half of 2020, countries such as Pakistan, Bangladesh, Mexico and India, saw a significant boost in remittances.
“The increased flow of remittances helped in mitigating the negative effects of the pandemic and the outflow of portfolio funds on their respective economies,” he said.
Aside from helping to reduce the cost of remitting funds to Nigeria and boosting remittance inflows to the country, the new forex policy, the CBN Governor said, is also expected to result in an increase in the external reserves as well as enhancing exchange rate stability.
In addition, he said the policy will provide an opportunity for Nigerians living abroad to make investments in their home country.
In his speech at the Bankers’ Committee summit on the economy held in Lagos on February 26, Emefiele had disclosed that following the new fx policy introduced by the CBN recently, remittance inflows to the country had improved from a weekly average of about $5 million before the policy, to over $30 million.
Meanwhile, announcing the new policy in a circular addressed to all Deposit Money Banks (DMBs), IMTOs and the general public, which was posted on its website yesterday, the CBN said the policy dubbed, “CBN Naira 4 Dollar Scheme”, takes effect from Monday March 8 and will end on Saturday May 8, 2021.
According to the circular dated March 5, 2021 and signed by A.S. Jibrin for the Director, Trade and Exchange Department, read in part: “In an effort to sustain the encouraging increase in inflows of diaspora remittances into the country, the Central Bank of Nigeria (CBN) hereby announces the introduction of the ‘CBN Naira 4 Dollar Scheme’, and incentive for senders and recipients of International Money Transfers.
“Accordingly, all recipients of diaspora remittances through CBN licensed IMTOs shall henceforth be paid N5 for every USD1 received as remittance inflow.
“In light of this, the CBN shall through commercial banks, pay to remittances recipients the incentive of N5 for every USD1 remitted by sender and collected by designated beneficiary.