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Diaspora remittances and imperatives of BDCs’ participation


Aminu Gwadabe

The Bureaux De Change (BDCs) have for years supported Nigeria’s growth agenda and the commitment to exchange rate stability by the Central Bank of Nigeria (CBN). To continue to play these roles creditably, the sector operators need improved access to foreign exchange (forex).
For the Association of Bureaux De Change Operators of Nigeria (ABCON), the success of its licensed members goes beyond favourable rates to access to multiple streams of forex earnings in efforts to deepen the market, keep the naira stable and boost operations.
Making BDCs one of  the channels through which over $25 billion yearly Diaspora remittances enter the economy will give depth to forex market and boost their operations, including job creation.
Oil has for long, remained the mainstay of Nigeria’s economy. Although it accounts for over 80 per cent of Nigeria’s foreign exchange (forex) earnings, the unpredictability of oil prices raises the risk of relying solely on it for Nigeria’s revenue.
This explains why the country needs multiple streams of forex earnings and the enlisting of more channels to attract Diaspora remittances and other foreign capital will not only deepen the market but keep the naira stable.By records, Diaspora remittances to Nigeria is estimated at $25 billion for 2018 and remain a reliable source of forex to the domestic economy and that is why over 4,500 CBN-licenced BDCs come to mind.
Already, concerned with the challenging state of the nation’s economy, which is marred by inconsistent forex earnings through oil export, ABCON is restating its calls for BDCs to be one of the channels for receiving Diaspora remittances into the economy.
ABCON President,  Dr. Aminu Gwadabe, agreed that the CBN forex policy has brought stability to the BDC segment and helped operators to embrace automation, which is the standard best practice globally.
But he also reiterated that if BDC is one of the channels through which the Diaspora remittance funds come into the country, it will be a good way to reduce the reliance of rate differentials to sustain  operators’ businesses.He said that the BDCs remain at the centre of economic development and have the capacity to attract needed capital for the development of the Nigerian economy.
For a fact, findings have also shown that forex remittances from Nigerians in the Diaspora far exceeded the country’s earnings from crude oil export last year.Since many transactions are unrecorded or take place through informal channels, the actual amount of remittance flows into  the country is arguably higher. The estimation is that migrant remittances to Nigeria could grow to $25.5 billion, $29.8 billion and $34.8 billion in 2019, 2021 and 2023 respectively. 
For instance, the total oil earnings of the nation stood at $15 billion in 2018, while the total remittance from Nigerians in Diaspora amounted to $25 billion in 2018. Nigeria earned a total of N5.54 trillion ($15.4 billion) from oil revenue last year, according to figures released by the Central Bank of Nigeria  (CBN).
“Diaspora remittances contribute to this economy more than what the oil sector is yielding. The Nigeria National Petroleum Corporation (NNPC) inflow in 2018 is about $15 billion, while migrant remittances, Diaspora remittances is nothing less than $25 billion annually into this country’s economy, and this inflow is steady and adds to the country’s Gross Domestic Product (GDP),” he said.
According to him, Diaspora remittances remain cheap source of fund, because it is not to be paid back with interest, but goes directly into the construction of houses, payment of school fees, medicals and a lot of things that are adding value to the economy.Gwadabe explained that Diaspora remittances represent household income from foreign economies arising mainly from the temporary or permanent movement of people to those economies. 
The remittances- cash and non-cash items flow through formal channels such as electronic wire, or through informal channels, such as money or goods carried across borders.He added that Nigeria can cover a large part of capital flow gaps through remittances from its citizens in Diaspora using the BDCs.
“Nigerian BDCs operators have also identified with the immense opportunities presented by Diaspora remittances and want to play greater role in attracting more foreign capital into the economy. Reason being that remittances are known to help poorer recipients meet basic needs, fund cash and non-cash investments, finance education, foster new businesses, service debt and essentially, drive economic growth,” he said.
Nigerian BDCs, like their counterparts in other emerging or developing economies, he said, have what it takes to deepen the forex market through remittances and collections. “When that happens, it will not be the first time that BDCs were given the opportunity to turn the remittances market around for good.
“In India, the BDCs generate over $30 billion from the Diaspora remittances. In United Arab Emirates, the entire banking needs are met by the BDCs. The working of the Lebanon economy is highly dependent on the activities of BDCs in that country. Therefore, Nigeria can also achieve higher revenue through BDCs given the opportunities we seen in the remittances market,” he said.He regretted that the cost of sending money from the Diaspora to Africa is rising. In the first quarter of 2018, the average cost of sending $200 was 7.1 percent, and remittance services in Sub-Saharan Africa were the costliest in the world at an average cost of 9.4 percent.
He insisted that renegotiating exclusive partnerships and letting new players operate through national post offices, banks, BDCs, and telecommunications companies will increase competition and lower remittance prices.

Connecting BDCs
Financial pundits have continued to give reasons why BDCs should be brought into the Diaspora remittance business. For instance, financial institutions’ long procedures, complicated forms, and history of poor service quality means BDCs are needed to deepen the market.
The BDCs segment of the market operates in a simple manner while remaining closer to the people needing the remittance funds. “BDCs buy foreign currency from remittance recipients and sell it to Nigerians who want to travel abroad. The reason for establishing these institutions in 1989 was to broaden the forex market and improve accessibility to hard currency.
“The CBN supervises and issues operational guidelines for BDCs. In March 2006, Nigeria had 293 licensed BDCs which have risen to over 4,500 operators today. This development means that BDCs are willing and ready to do the remittance business,” Gwadabe said.He explained that money senders want their beneficiaries to get a favorable exchange rate and more value in the local currency and such can only be achieved in a competitive market where recipients have several options, including BDCs.
Gwadabe said  a coherent policy framework to harness remittances into generating capital for productive investments for the growth and development of small and micro-enterprises, which will in turn, create employment was required.
In addition, remittances can be deployed toward philanthropic activities which can serve as solutions for specific deficiencies in the local infrastructure such as schools, hospitals and roads. For him, remittances are on track to become the largest source of external financing in developing countries and Nigeria cannot be left behind.

VAT exemption
ABCON said VAT charge is the bigger problem confronting operators, as a large part of their income go into paying taxes. But it has appointed Mike Akinfolarin & Associates as Consultant/Tax Attorneys on VAT, adding that in other economies, foreign exchange rate control by government is VAT exempt.
“The law company made a representation on behalf of ABCON before the  National Assembly public hearing, House Committee on Finance Bill on November 25, 2019, in Abuja. And that remains the position of ABCON,” he said.But also speaking on Diaspora remittances, the Director-General of the West African Institute for Financial and Economic Management (WAIFEM), Dr. Baba Musa, explained that in economics, Diaspora remittances are called non-debt creating flow, which comes in like Foreign Direct Investment (FDI).He said that Diaspora remittances remain crucial in economic development, but there was need to look at how they are coming in, adding that the source of many of the funds are never known, hence the need to broaden the remittance channels.


Exchange rate stance
ABCON has also defended CBN policy on foreign exchange allocation to BDCs, which it believes has stabilised the naira against the dollar.However, the association has faulted ongoing petition against the CBN Governor, Godwin Emefiele and its management team over the deployment of dual exchange rate regime in forex allocation.He faulted the N305/$ rate to BDC as proposed by the petitioner, saying it is not transactional rate, but used for settling government obligations.
“There is a case against the CBN Governor and his management team written by Bar. J.U Ayogu. A petition before the Senate was laid on December 12, 2019 where Bar. J. U Ayogu, Esq, on behalf of the Bureaux De Change Operators of Nigeria wrote against the CBN over its dual exchange rate forex policy that enriches few Nigerians and its top management staff to the detriment of many lawful Nigerians and frustrating the policy of the present administration of eradicating poverty and unemployment from all the nooks and crannies of Nigeria,” Member, Senate Committee on Finance, Senator Ayo Akinyelure (PDP, Ondo Central) said.
But ABCON Management, said the CBN forex policy has brought stability to the BDC industry and helped operators to embrace automation which is the standard best practice globally.“This is hand work of unknown faces, not ABCON. It is confrontational and lack credible evidence. ABCON submission to the National Assembly is on Value Added Tax (VAT) exemption and downward review of licence fee renewal submitted to the CBN. The petitioner was never at any time appointed to speak on behalf of BDCs,” Gwadabe said.He disclosed that no BDC or service provider gets forex at N305 to dollar and that the petitioner’s claim is completely false.


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