CBN stages promo to boost diaspora remittances
The Central Bank of Nigeria (CBN), at the weekend, took a seemingly desperate option against the stubborn foreign exchange crisis; unveiling a new promotional campaign that would see recipients of diaspora remittances earn extra incomes.
In a circular addressed to banks, the international money transfer operators (IMTOs) and the public, the regulator unveiled a new scheme tagged ‘CBN Naira 4 Dollar Scheme,’ akin to the traditional end of year sales promo.
The promo, aimed at boosting diaspora remittances and foreign exchange liquidity, will see diaspora remittance recipients earn an extra N5 for every dollar wired home through the official window, as against the more lucrative black market.
The memo dated March 5, 2021, but released yesterday read: “In an effort to sustain the encouraging increase in inflows of diaspora remittances into the country, CBN hereby announces the introduction of the ‘CBN Naira 4 Dollar Scheme’, an 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.”
The bonus, according to the circular, would be paid by CBN through the IMTO agents (money deposit banks).
“In light of this, the CBN shall, through commercial banks, pay to remittance recipients the incentive of N5 for every USD1 remitted by the sender and collected by the designated beneficiary. 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 the 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 Bank said in the memo signed by the Director, Trade and Exchange Department, A.S Jibrin.
The promo, which targets the supply side of the market, becomes effective from Monday, March 8, 2020. The CBN said in the circular that banks and IMTOs have been briefed on the implementation.
As attractive as the incentive sounds, economists balk at its ability to turn the tide, as the black market routes remain more attractive.
The United Nation Sustainable Development Goals (SDGs) targets to reduce the cost of remittances, which Bretton Woods institutions, particularly the World Bank, admits are crucial for addressing global poverty and mitigating the impacts of COVID-19, to three per cent by 2030.
Sub-Saharan Africa, including Nigeria, is the most expensive region to send money to globally. In the third quarter of 2020, the average cost of sending $200 to Sub-Saharan Africa was put at about 8.5 per cent by the World Bank, well above the global average of 6.8 per cent.
High cost of remittance is just one of the reasons many Nigerians in the Diaspora take the backdoor approach to send money home. The wide differential between the official exchange and the black market rates, which is currently about N80 per dollar, is perhaps the strongest disincentive.
Last year, the Central Bank took a decisive approach to give beneficiaries of transfer proceeds the choice of getting paid in dollars, retooling the hitherto rules on remittance payment. The Bank issues a series of circulars reiterating the power of remittance recipients to withdraw in the currency the money was transferred.
“For the avoidance of doubt, the CBN further clarifies as follows: Only licensed IMTOs are permitted to carry on the business of facilitating diaspora remittances into Nigeria. All diaspora remittances must be received by beneficiaries in foreign currency only (cash and/or transfers to domiciliary accounts or recipients); IMTOs are not permitted, under any circumstances, to disburse diaspora remittances in naira (either in cash or by electronic transfers), be it through remittance settlement accounts (which had been earlier directed to be closed), third party accounts or via any other payment platforms within and/or around the Nigerian financial system,’’ the Bank said in one of the circulars.
CBN Governor, Godwin Emefiele, had expressed concern that the IMTOs did nothing to promote a robust remittance market, but continue to exploit the wide arbitrage to the market’s detriment.
While recipients are entitled to withdraw in foreign currencies, The Guardian learnt that the market remains skewed against customers and beneficiaries, as recipients are either forced to take small denominations or arm-twisted to go for the naira equivalent by banks “who hardly have a dollar at the moment.”
The new campaign is a ride against these odds, a banker told The Guardian at the weekend.