New policy on remittance inflow to reduce cost, check round-tripping

Further to the introduction of its new “CBN Naira 4 Dollar Scheme” which comes into effect on Monday, March 8, 2021, the Central Bank of Nigeria has said the move is aimed at providing Nigerians in the Diaspora with cheaper and more convenient ways of sending remittances to Nigeria.  The CBN Governor, Mr. Godwin 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. Mr. Emefiele  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 stabilising 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. Reiterating the provision of the new circular, the CBN Governor said the Bank introduced the rebate of N5 for every $1 of fund remitted to Nigeria, through International Money Transfer Operators (IMTOs) licensed by the Central Bank in order to incentivise the process of remittance. He explained that the rebate will be provided to the bank accounts of beneficiaries, following receipt of remittance inflows.  Emefiele emphasised 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.