CBN introduces new policy allowing diaspora remittances to be collected in foreign currency

CENTRAL Bank of Nigeria (CBN) officials have unveiled a new financial policy that grants unfettered access to foreign exchange sent from the diaspora and other money transfer remittances that come into the country through the likes of  Western Union and MoneyGram.


Diaspora remittances are currently the biggest source of foreign exchange in Nigeria today, with about $25bn being sent in annually. However, up until now, recipients have only been able to collect their cash in naira but with there currently being a chronic scarcity of foreign exchange in Nigeria, the CBN has altered its policy, saying transactions that are eligible under the new law are in line with global best practices.


This new policy allows beneficiaries of diaspora remittances through international money transfer operators to henceforth receive such inflows in the original foreign currency through the designated bank of their choice. According to the CBN, the new regulation is part of efforts to liberalise, simplify and improve the receipt and administration of diaspora remittances into Nigeria.


Dr Ozoemena Nnaji, the director of CBN's trade and exchange department, said that with the new policy, recipients of remittances may have the option of receiving such funds in foreign currency cash or into their ordinary domiciliary account. He added: “These changes are necessary to deepen the foreign exchange market, provide more liquidity and create more transparency in the administration of Diaspora remittances into Nigeria.”


Furthermore, the CBN explained that the changes would help finance a future stream of investment opportunities for Nigerians in the diaspora, while also guaranteeing that the recipients of remittances would receive a market- reflective exchange rate for their inflows. It said all authorised dealers and the general public should note that beneficiaries shall have unfettered access and utilisation to such foreign currency proceeds, either in cash and/or in their domiciliary accounts.


In a separate circular titled Operations of Domiciliary Accounts, also signed by Dr Nnaji, the CBN clarified that following different interpretations on the operationalisation of domiciliary accounts, to ensure the stability of the foreign exchange market, export proceeds domiciliary accounts would continue to be operated based on existing regulations, which allow its holders use of their funds for business operations only, with any extra funds sold in the investors and exporters window. On the other hand, it stated that for ordinary domiciliary accounts, where such accounts are funded by electronic/wire transfer, account holders would be allowed unfettered and unrestricted use of the funds for eligible transactions.


Recently, the World Bank predicted that inflow of diaspora remittances to Nigeria would drop by $2bn in 2020 to $21.7bn as against the $23.8bn the country recorded in 2019. The World Bank in a report had hinged the decline in remittances from Nigerians living abroad on account of the double whammy of the Covid-19 pandemic and the attendant economic crisis that has continued to spread.


Globally, the bank had also anticipated that the amount of money migrant workers send home would decline by 14% by 2021, compared to the pre-Covid-19 levels in 2019. According to the report, remittance flows to low and middle-income countries (LMICs) are also projected to fall by 7% to $508bn in 2020, followed by a further decline of 7.5%, to $470bn in 2021.


It stated: “Remittances are helping to address the impact on African households. Nigeria remains the largest recipient of remittances in the region and is the seventh largest recipient among LMICs, with projected remittances to decline to around $21.7bn, a more than $2bn drop compared with 2019.”


In addition, it had stated that the foremost factors driving the decline in remittances included weak economic growth and employment levels in migrant-hosting countries, weak oil prices and depreciation of the currencies of remittance-source countries against the US dollar. Nigeria is the fifth largest sender of remittances after India, China, The Philippines, and Mexico.