The Central Bank of Nigeria has announced vide its circular of 5th March,2021 signed by its Director, Trade and Exchange Department, A.S.Jibrin, the introduction of a new scheme which seeks to sustain and increase diaspora remittance inflows, with effect from Monday, March 8, 2021.
Under the new ” CBN Naira 4 Dollar Scheme” which the circular described as an “incentive for senders and recipients of International Money Transfers”, the Apex bank will, through commercial banks, pay N5 (five naira only) for every USD1 (one dollar) remitted and received by the beneficiary.
“Accordingly, all recipients of diaspora remittances through CBN licenced International Money Transfer Operators (IMTOs) shall henceforth be paid N5 for every USD1 received as remittance inflow.
“This incentive 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 effect, a typical recipient of diaspora remittances will, at the point of collection, receive not only the USD sent from abroad but also the additional N5 per USD received.
The circular also stated that the policy is for a two-month period.
“The scheme takes effect from Monday 8 March, 2021 and ends on Saturday 8 May, 2021.
Meanwhile, the Governor of the Central Bank of Nigeria, Mr. Godwin Emefiele, has stated that the new policy has the capacity to reduce costs as well as make the process more convenient.
Emefiele stated this at the weekend while delivering the keynote address to the Fidelity Bank’s Inaugural Diaspora Webinar on the Implications and Impact of the New FX Policy on Diaspora Investments.
He explained that the move was also to increase the transparency of remittance inflows and reducing rent-seeking activities., even as he expressed optimism that the new policy measure will encourage banks and financial institutions to develop products and investments vehicles, geared towards attracting investments from Nigerians in the diaspora.
He said the new policy is expected to enlarge the scope and scale of foreign exchange inflows into the country with a view to stabilizing the exchange rate and supporting accretion to external reserves. More importantly, he said it would provide an opportunity for Nigerians living abroad to make investments in their home country.
Emefiele emphasized that the new measure would help to make the process of sending remittance through formal bank channels cheaper and more convenient for Nigerians in the diaspora.
Citing cases in other climes, Mr. Emefiele said the use of reimbursements of remittance fees had been critical in supporting improved inflow of remittances to countries in South Asia and in improving their balance of payments position following the COVID-19 pandemic.
While noting that the average cost of sending $200 worth remittances to Nigeria from the United States was about 4.7 percent, he said studies had shown that even a one percent decrease in cost of sending remittance could result in a significant boost in inflows.
“Countries in South Asia such as Pakistan and Bangladesh are aware of this impact and they introduced reimbursement schemes to support inflows. In Pakistan the scheme which is known as free send has enabled record amount of inflows of over $2bn a month even during the COVID pandemic.
“Bangladesh introduced its own scheme in June 2019, which is a 2 percent rebate on remittance inflows. Following this action, they have also seen a 20 percent boost in remittance inflows,” he explained.
Commenting on the issue of round-tripping, the Bank’s spokesman and Ag. Director, Corporate Communications Department, Osita Nwanisobi explained that there was a maximum amount that could be remitted through an IMTO, adding that no customer could send $100,000 through an IMTO.
Though he admitted that the CBN action does not go far enough in offering total reimbursements, Nwanisobi said it was a step in the right direction in reducing the cost burden for Nigerians remitting funds to Nigeria.
While also noting the existence of initial challenges of network integration, Nwanisobi reiterated Emefiele’s assurance that the CBN would continue to work assiduously to resolve the few challenges that were remaining.