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The value of annual dollar remittances by Nigerians working abroad has surged to $34 billion, according to a report, a figure that easily exceeding the previous record-high of $25 billion.
Africa Daily News, New York reports that going by reports that according to news.bitcoin.com, a large portion of the funds however does not seem to be entering domestic forex markets.
The increase, which has been attributed to the Central Bank of Nigeria (CBN)’s ‘naira for dollar’ incentive scheme, once again highlights the growing importance of diaspora remittances to Africa’s most populated country.
An economist with Adedipe Associates Limited, Mr. Biodun Adedipe, is quoted to have explained that the CBN’s incentive scheme may well be the reason why the target of $34 billion in annual diaspora remittances was reached two years ahead of schedule.
Despite this surge in remittance inflows, Nigeria continues to grapple with shortages of foreign exchange.
Such forex shortages, in turn, contribute to the naira’s continued depreciation as well as the resultant rise in inflation.
In attempting to explain why Nigeria is not fully benefiting from the rising remittances, Adedipe points to the fact that a lot of the dollars sent do not find their way to the foreign exchange market in Nigeria.
Adedipe explained: ‘For example, someone wants to send money to his or her family here in Nigeria, this person, let’s say has $10,000 in the US, and wants to give the naira equivalent to his family member here in Nigeria. Ordinarily, the way it works in other country is that $10,000 will come into the forex market within Nigeria, and becomes a boost to supply here.
‘However, this is not happening because the reality is that in Nigeria’s situation, the dollar doesn’t leave where it is.’
Adedipe further explained: ‘The person that provides the naira equivalent here would rather keep the dollar equivalent outside there, so it doesn’t come into the FX market in Nigeria.’
According to Adedipe, Nigerian authorities now need to find ways that ‘make it more attractive for those foreign currencies generated by migrant Nigerian workers to be remitted home.’
AFRICA DAILY NEWS, NEW YORK