The Central Bank of Nigeria (CBN) says it has seen a surge in remittance inflows on the back of the naira-for-dollar scheme it introduced last year as an incentive for senders and recipients of international money transfers.
Under the scheme, all recipients of diaspora remittances through CBN-licensed international money transfer organisations are paid N5 for every $1 received as remittance inflow.
Godwin Emefiele, governor of CBN, said on Thursday that naira had remained largely stable at the Investors and Exporters (I&E) window, following the demand management policy of the apex bank.
He said this was particularly since the discontinuation of foreign exchange (FX) allocation to Bureau De Change (BDC) operators, along with the convergence between the CBN and NAFEX rates.
On July 29, 2021, the CBN announced the immediate discontinuance of foreign currencies sales to BDC operators in Nigeria. It also suspended the applications for and issuance of new licenses for BDC operations in the country.
“Banks are now able to meet the demands of their customers seeking forex for SMEs, school fees, medical and PTAs,” Emefiele said at a seminar for Finance Correspondents Association of Nigeria and business editors, in Akure, Ondo State.
“Towards containing inflation and cushioning the impact of the drop in the supply of foreign exchange in the economy, not only did we tighten the monetary policy stance over a period, we also introduced demand management approaches to conserve our reserves and support the domestic production of certain goods,” he said.
One of the CBN’s demand management measures was to encourage the manufacturers to consider local options in sourcing for raw materials by restricting access to FX on 43 items. Four of the items alone, at the time, constituted over N1 trillion of the country’s annual import bill.
Read also: Naira stable at I&E window on CBN’s demand management policy says Emefiele
The central bank also established the I&E window to allow for purchase and sale of FX at prevailing market rate. It ensured the liberalisation of the forex market through the operationalisation of the “revised guidelines for the operation of Nigerian inter-bank foreign exchange market” in June 2016. The guidelines introduced the naira-settled foreign exchange futures market.
Other measures taken by the CBN included a partnership with commercial banks to go after Nigerians who falsely bought dollars under the pretence of travelling abroad but ended up being involved in round-tripping.
Emefiele, who was represented by Edward Lametek, deputy governor, corporate services at CBN, said the country’s current account deficit had narrowed significantly due to a surplus position in the goods account.
According to him, the surplus position in the goods account is occasioned by a reduction in imports, increase in crude oil and gas export receipts, and improvement in remittances.
He said, “Remittance inflows have been supported by our ‘Naira for Dollar’ scheme, and we have seen a surge in remittance inflows. In our sustained effort to reduce foreign exchange demand pressure and facilitate investment, the CBN, on April 27, 2018, signed a three-year bilateral currency swap agreement of $2.5 billion, equivalent to ¥15.0 billion or N720.0 billion with the Peoples Bank of China.
“It is heartening to note that these policies are yielding positive results in terms of meeting genuine demand for foreign exchange and exchange rate stability.
“Despite the headwinds associated with the pandemic, the central bank has worked very hard to ensure that Nigeria remains a vibrant economy with a diversified mix of opportunities across sectors such as ICT, manufacturing, solid minerals, trade and agriculture. Notwithstanding these modest achievements, we cannot afford to rest on our oars as the work is far from over.”
