Economy
By Isibor Anthony.
GODWIN Emefiele, Governor of the Central Bank of Nigeria has reiterated the commitment of the government to achieve the Sustainable Development Goals by increasing the volume of global remittances as a percentage of GDP while reducing the cost of remittances.
Speaking at the Fidelity Bank inaugural diaspora webinar on the implications and impact of the new forex policy on diaspora investments, Emefiele stressed the need to tap into the large resource of Nigerians living abroad as a way of further improving economic growth and development locally.
According to him, the remittances from Nigerians living abroad have had a significant benefit on domestic income, social welfare, and economic growth in Nigeria.
“Given the depth of skills that Nigerians in the diaspora possess, an effective engagement with them is vital towards maximizing the gains that they could make in supporting further investment and growth in Nigeria.
“Our diaspora community, given their ties to Nigeria has a vital interest in supporting improved welfare of Nigerians at home. In addition, remittances are less volatile when compared to other forms of foreign investment, such as foreign portfolio investment, which could be prone to sudden reversals, and are influenced by external factors, such as changes in monetary policy by advanced countries,” he said.
According to Emefiele, emerging market countries have witnessed a significant reversal of one hundred billion dollars with its implications since the onset of covid-19 in 2020.
“Following the onset of the COVID-19 pandemic in 2020, emerging market countries witnessed a significant reversal of $100bn worth of financial flows, as investors retreated to safe-haven assets such as US treasury bills.
“Some analysts had expected a significant dip in remittances to emerging and frontier markets as a result of the slowdown in global growth in the 1st half of the year. This was not the case in countries such as Pakistan, Bangladesh, Mexico, and India, where we saw a significant boost in remittances.
“The increased flow of remittances helped in mitigating the negative effects of the pandemic and the outflow of portfolio funds on their respective economies.
“At the Central Bank of Nigeria, we understand its ramifications for exchange rate stability, reserve accretion, job creation, poverty reduction, and economic growth. As a result, our policy aim is to broaden the scope and scale of diaspora inflows, while ensuring that those in the diaspora leverage formal channels in remitting funds, rather than informal channels that are more susceptible to fraud, in addition to poor safeguards for consumers that utilize these services,” he said
He said the global economic goals align perfectly with the objectives of the Central Bank of Nigeria, CBN.
“One of the key elements of the Sustainable Development Goals is to increase the volume of global remittances as a percentage of GDP, while reducing the cost of remittances. This aligns perfectly with the objective of the CBN and the Nigerian government. Following the recent outbreak of the Covid-19 pandemic, global remittance flows to developing countries is estimated to fall by 7.2 percent to US$508 billion in 2020 and a further 7.5 percent to US$470 4 Classified as Confidential billion in 2021.
“Regardless of the global fall in remittance flows in 2020, they remain a major source of stable external financing for developing countries,” he said.
According to him, Nigeria was ranked the seventh-largest recipient of foreign remittance in 2019.
“Today, the World Bank data shows that Nigeria, with a total flow of US$21 billion, was the seventh-largest recipient of remittances in 2019. This is behind India, China, and even Egypt.
“Though official remittance flows declined in 2020 due largely to the undermining impact of the Covid-19 pandemic, it maintained its dominance over FDI inflows. Accordingly, the CBN strives to constantly improve our remittance infrastructure, ease the process of international money transfer and simplify the experience for senders and recipients.
“In this regard, we note that the efficiency of remittance services, especially as provided by the international money transfer organizations, IMTOs, are critical to our aim of boosting inflows. We would constantly seek to fine-tune our 5 Classified as Confidential policies to mitigate factors that affect the quality-of-service customers face when using IMTOs.
“Many analysts are of the view that remittance flows to Nigeria may be largely underestimated given the unofficial transfer routes and incomplete reportage by remittance service providers. PwC forecasts suggest that Nigeria’s remittance flows could reach US$34.89 billion by 2023. But this can only be accomplished if remittance infrastructure improves and if the right policies are put in place.
“Report of remittance inflows are grossly characterized and marred by irregularities as some money transfer operators unlawfully choose to under-report the inflows. Their mode of operation is to report less amount than what they received and thereafter pursue arbitrage premium by selling the unreported excess in other markets at different rates. This is our definition of round-tripping, which is wholly illegal in Nigeria,” he said.
Accordingly, and in view of the need to correct the observed irregularities, the CBN took decisive policy actions.
“These policies amended the procedures for receipt of diaspora remittances with the overall aim of improving the administration of remittance flows to Nigeria.
“The key highlights of the New Policies are:
1. Beneficiaries of remittance flow through an international money transfer organization (IMTO) shall only receive such inflows in foreign currency (the US dollars) through any bank of their choice;
2. Recipients have the sole decision to receive the foreign currency (US dollar) either in physical cash or instruct the bank to credit the fund to an ordinary domiciliary account, depending on their preference;
3. IMTOs are mandated to unambiguously disclose to remittance beneficiaries that such recipients have exclusive discretion to decide the mode of payment;
4. IMTOs must ensure that all funds received in favour of beneficiaries in Nigeria are promptly deposited into the agent bank’s correspondent account.
“Furthermore, in an effort to reduce the cost burden of remitting funds to Nigeria by working Nigerians in the Diaspora, the Central Bank of Nigeria has introduced a rebate of N5 for every $1 of fund remitted to Nigeria, through IMTOs licensed by the Central Bank. This rebate will be provided to the bank accounts of beneficiaries, following receipt of remittance inflows.
“We believe this new measure will help to make the process of sending remittance through formal bank channels cheaper and more convenient for Nigerians in the diaspora,” he said.
– Mar. 8, 2021 @ 18:05 GMT |
A.I
Tags: CBN governor Central Bank of Nigeria Godwin Emefiele
