After two months of trial period, the Central Bank of Nigeria (CBN) on Thursday extended the naira for dollar scheme till further notice, but market realities show foreign exchange still pressured.
On March 6, 2021, the CBN introduced the naira for dollar scheme as an incentive to boost inflows of diaspora remittances into the country.
The new policy on remittances flow allowed for payment of N5 for every one dollar received by all recipients of diaspora remittances through the CBN licensed International Money Transfer Operators (IMTOS).
The naira for dollar scheme was originally scheduled to end on May 8, 2021. However, market realities show that two months after, Nigeria’s currency at the Investors and Exporters (I&E) still hovers around N411.00k and N410.50k as at Wednesday, May 5, 2021, as against N411.00k in March 5, 2021, when the scheme was introduced.
At the parallel market, naira depreciated by 1.04 percent to N485 as at May 5, 2021, compared to N480 in March 5, 2021.
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External reserves stood at $34.78 billion as at May 4, 2021, representing a marginal decline of 0.17 percent from $34.84 billion recorded in March 5, 2021, data from the
CBN website showed.
The naira for dollar extension was seen in a letter to all deposit money banks, International Money Transfers Operators (IMTOS) and the general public dated May 5, 2021 and signed by A.S Jibrin for director, trade and exchange department, CBN.
Although analysts in the financial sector see the extension as a positive one, they could not lay hands on the justification for the extension.
“The idea of extending the naira for dollar scheme beyond the initial period is good. However, this CBN circular should have included a paragraph providing justification for its extension,” Uche Uwaleke, professor of capital market and president,
Capital Market Academics of Nigeria, said.
The new policy on remittances flow, which offers to reward recipients of diaspora remittances is expected to reduce costs and check round-tripping, according to the regulator.
Ayodeji Ebo, head, retail investment, Chapel Hill Denham, believes there should have been data available to analyze the impact of scheme.
However, he said for the CBN to extend the scheme, it means that it has seen that it is yielding results. Over time, he said the objective of the policy scheme would be achieved.
Godwin Emefiele, the CBN governor had 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 stabilizing 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.
