Dollar inflows into Nigeria through International Money Transfer Operators (IMTOs) has increased by 65 percent in the nine months of 2024 on the back of the recent reforms by the Central Bank of Nigeria (CBN).
BusinessDay analysis of the data from the latest quarterly statistical bulletin of the CBN shows that dollar inflows rose to $3.8 billion in the nine months of 2024, from $2.3 billion in the same period of 2023.
It also grew on a quarter-on-quarter basis from $1.5 billion in Q3.
“The rise in remittance inflow can be attributed to the reforms that were implemented by the central bank aimed at attracting more dollar supply through IMTOs and the liberalisation of the FX market,” Muda Yusuf, chief executive officer of the Centre for the Promotion of Private Enterprise (CPPE), said.
“A lot of the barriers have been removed and there is no exchange rate barrier anymore as there are more IMTOs.”
Analysts at FBNQuest Research said in a note that the CBN’s initiatives, including revised guidelines and a streamlined regulatory framework, have created a more favourable environment for remittance companies.
“One such initiative was the removal of limits on exchange rates quoted by IMTOs, allowing for more market-reflective rates,” it said.
In June, the CBN issued a circular granting IMTOs access to naira liquidity at its discount window. These measures, along with the approval of licences for more IMTOs, helped to boost inflows.
Read also: Naira stability linked to low dollar demand, rising inflows
As a result, IMTOs’ share of inflows from diaspora remittances is rising, accounting for 24 percent of the total remittances of $15.9 billion over 9M ’24, up from 16 percent in 9M ‘23.
The report added that FX inflows through the IMTO channel have also contributed to Nigeria’s external reserve position, which increased by nearly $8 billion y/y to $40.9 billion as of Dec ’24, thereby enhancing FX liquidity.
The float of the naira and the near elimination of the parallel market premium have made formal channels like IMTOs increasingly attractive for diaspora remittances. This shift is expected to sustain growth in dollar inflows, fostering greater transparency and efficiency in the FX market.
According to the World Bank, an international financial body disclosed that Africa received $100 billion in remittances in 2023, equivalent to 6 percent of the continent’s GDP. This figure surpassed official development assistance ($42 billion) and foreign direct investment ($48 billion).
“The gap between remittances and FDI is projected to widen, with remittance inflows rising steadily. Over the past decade, remittances have increased by 57 percent, while FDI has declined by 41 percent.
Nigeria remains the largest recipient of remittances in the region, accounting for 38 percent of total flows in 2023 and registering a 2 percent growth. Ghana and Kenya, the second and third largest recipients, saw increases of 5.6 percent and 3.8 percent, respectively.
Despite these gains, global macroeconomic shocks could challenge sustaining the current momentum in diaspora remittances.
“The decline in workers’ remittances by 28 percent to $17 billion in 2020 during the COVID-19 pandemic serves as a cautionary example of external vulnerabilities,” analysts at FBNQuest said.
Join BusinessDay whatsapp Channel, to stay up to date
Open In Whatsapp
