THE Central Bank of Nigeria (CBN) governor has disclosed that weekly remittances into Nigeria have increased from 5 million dollars to 30 million dollars due to the bank’s new foreign exchange (FX) policy that allow recipients to withdraw proceeds in foreign currency. The movement from 5 million dollars to 30 million dollars represents 500 percent increase.

Emefiele said on Friday at Vanguard/CBN/Bankers’ Committee Summit in Abuja that the new measure had increased the volume of transactions while reducing FX diversion by international money transfer operators (IMTOs) who had profited from dollar arbitrage arrangements.

CBN had, in November 2020, announced that it would allow diaspora remittances to be withdrawn in cash in a move to spur liquidity in the FX market and close the gap between the official FX rate and parallel/ black market rates. The bank had, before then, foreclosed the possibility of withdrawing foreign remittances in dollars due to FX scarcity in the economy. But the move proved very costly for the economy as it led to acute dollar shortages, which hurt manufacturers and key economic players, plunging the economy into a deep slump.

However, the apex bank reversed the policy gear three months ago by allowing recipients to withdraw dollar remittances in cash.

Why remittances went north

Emefiele said in Lagos that the change of policy had led to increased remittances into the economy. The implication of this is that the former CBN policy drove Nigerians into diverting foreign remittances to informal channels; this, in simple terms, implies that people were diverting their remittances or receiving them via informal routes due to the former policy that barred them from getting dollars in cash. The former CBN’s policy made receiving FX in cash difficult. Still, it encouraged FX’s receipt in naira rather than dollars, pushing diaspora senders and receivers into routing their remittances via other means.

Many say the CBN’s former policy was inimical to the economy as it shortchanged several Nigerians and hurt their capacity to do business.

“I did a business with someone in the United States. The transaction was in dollars, but I could not withdraw in dollars. That shortchanged me in the end,” Eniola Akinsanya, a hairstylist in Lagos, told The ICIR.

READ MORE: https://www.icirnigeria.org/explainer-why-weekly-dollar-inflows-into-nigeria-rose-by-500-percent/