Nigeria is attracting more diaspora remittances yet that has not helped boost the country’s foreign exchange reserves neither has it curbed the pressure on the naira.
Godwin Emefiele, governor of the Central Bank of Nigeria (CBN) said the Naira4Dollar Scheme helped boost remittances from only $6 million per week to over $100 million per week, an increase of 1,566 percent.
But Nigeria’s external reserves have declined to $39.87 billion as of February 10, 2022, the lowest since October 29, 2021 when it stood at $41.82 billion, representing a 4.66 percent decline, data from the CBN website indicated.
Nigeria’s currency has been under pressure despite the rise in oil prices. Naira/dollar exchange rate closed flat at N430.00/USD amid CBN’s weekly injections of USD210 million.
Read also: Naira4Dollar boosts remittances by 1,566.6% says Emefiele
Responding to the rising remittances flow, Taiwo Oyedele, head of Tax and Corporate Advisory Services at PwC, said, comparing the current $100m weekly remittances to about $6m at the height of the pandemic does not give a true picture of the situation.
“We should rather compare the current level of remittances to the pre-pandemic period and also interrogate whether the improvement recorded so far is merely a transfer between remittance channels rather than an increase in inflows,” he said.
In any case, he said the aggregate inflows of foreign exchange into the country from all sources still fall short of the country’s demand hence the sustained pressure on the external reserve and consequently the relative value of the Naira.
Ultimately, Nigeria’s ability to attract sufficient foreign exchange, enhance local substitution for imported goods and generally improve the business climate will be a function of right policies in a secured operating environment, Oyedele said.
The CBN had introduced the Naira 4 dollar scheme on March 6, 2021, as an incentive to boost inflows of diaspora remittances into the country.
Muda Yusuf, Chief Executive Officer of The Centre for the Promotion of Private Enterprise (CPPE) explained that Diaspora remittances are channelled towards consumption and investment and that is why it usually does not have much impact on foreign exchange reserves and naira stability.
Diaspora remittances rose by 5.1 per cent, quarter-on-quarter to $4.28 billion in the first quarter of 2021 from $4.07 billion in Q4’2020, data from the CBN show.
Foreign exchange flow through the economy dwindled in October, according to a report by the CBN. Aggregate foreign exchange inflow into the economy was US$7.00 billion, in October 2021, compared with US$13.38 billion in September 2021.
The difference between the levels in October and the preceding month was mainly accounted for by the debt proceeds of Eurobonds, which boosted receipts in September 2021.
Johnson Chukwu, group managing director, Cowry Asset Management Limited, noted on February 3, 2022 that Nigeria recorded $1.44 billion inflow of Foreign Direct Investment (FDI) in 2015, $1.028 billion was recorded in 2020 as against $340.55billion in 9 months 2021, which according to him, is a far cry from those of other countries in the region.
