Central Bank of Nigeria (CBN) has extended the new foreign exchange incentive scheme, ‘Naira For Dollar’ until further notice, in an apparent move to tackle the supply side of the greenback, according to some analysts.
The scheme which was introduced recently indicates that for every US dollar (USD) Nigerians in diaspora or any other person for that matter, sent to Nigeria until May 8th 2021, would attract a five naira bonus. The scheme was to elapse on May 8, 2021.
However, according to a memo released last night by CBN to all Deposit Money Banks, International Money Transfer Organisations (IMTOs) and signed by A. S Jibrin for Director, Trade and Exchange Department, CBN said : “Further to the CBN circular referenced TED/FEM/PUB/PPC/01/003 dated 05 March 2021 on the above subject matter which was originally scheduled to end on 08 May 2021, we hereby announce the continuation of the scheme until further notice. All aspects of the operationalization of the programme remains the same.”
Metrobusiness reports that the initial introduction of the scheme followed the announcement then by the CBN that international money transfers into Nigeria would only be paid out in US dollars (USD).
Consequently, the ₦5 bonus for every USD sent acts as an incentive for both senders and recipients of money transfers while boosting economic growth in the country.
Thereafter, CBN approved additional 10 International Money Transfer Operators (IMTOs) to handle foreign exchange remittances by the Diaspora Nigerians, raising the number to 57.
In fact, the apex bank had on March 22, approved a list of 47 companies based mainly in Nigeria, Europe and America to handle such transactions.
According to the list posted on the bank’s website the IMTOs based in the United kingdom increased from 17 to 21; while those in Lagos rose from 14 to 16.One more IMTO was approved in the United States of America to make them nine, from the initial eight, while the Abuja figure increased from three to four.
One firm was approved in Australia, with two Senegal and one each in Ibadan, Morocco and Belgium. The CBN recently banned unauthorized international money transfer operators from such transactions, warning that it would apply severe sanctions against them, if they remained adamant.
It also came up with a new policy to force IMTOs and Money Deposit Banks to pay recipients of remittances in foreign currencies, rather than the Naira. Until then, the IMTOs and banks were said to be shortchanging remittances beneficiaries, as they gave them less Naira equivalent of their foreign exchange sent to them by Nigerians in the Diaspora.
The practice was seen to have become a disincentive to Diaspora remittances, which led to the policy measures of the apex bank.
According to the list posted on the bank’s website the IMTOs based in the United kingdom increased from 17 to 21; while those in Lagos rose from 14 to 16.One more IMTO was approved in the United States of America to make them nine, from the initial eight, while the Abuja figure increased from three to four.
One firm was approved in Australia, with two Senegal and one each in Ibadan, Morocco and Belgium. The CBN recently banned unauthorized international money transfer operators from such transactions, warning that it would apply severe sanctions against them, if they remained adamant.
It also came up with a new policy to force IMTOs and Money Deposit Banks to pay recipients of remittances in foreign currencies, rather than the Naira. Until then, the IMTOs and banks were said to be shortchanging remittances beneficiaries, as they gave them less Naira equivalent of their foreign exchange sent to them by Nigerians in the Diaspora.
The practice was seen to have become a disincentive to Diaspora remittances, which led to the policy measures of the apex bank.
Godwin Emefiele, CBN governor had said recently that the policy had been effectively applied by other jurisdictions to increase Diaspora remittances and expressed that Nigeria would also witness a boost in remittances, going forward.
But while some analysts applaud CBN over some of the policy measures that have enhanced stability in the foreign exchange market relatively, others believe that the country’s forex market is still plagued with two major problems – the price and supply of forex, which had resulted in dollar scarcity forcing many manufacturers to the parallel market to source for over 90% of their forex needs.
This has left many of them with a blended and more expensive rate around N490/$.
In the last three years, the naira has depreciated by over 33.88% to N495-496/$ at the parallel market and over 14.35% to N412/$ at the I & E window. The CBN’s forex rationing and uncertainty surrounding its exchange rate policy have exacerbated the problem and increased the risk of capital flight.
Further investigations revealed and suggest that increasing allocations of dollars over $4bn in the spot and forward markets could lead to over 4% convergence, leading to the appreciation of the local currency. Also, maintaining a supply pipeline of about and over $2bn a month could stem the exchange rate haemorrhaging in the near term.
Tony Elumelu, chairman of UBA Plc, on the Arise Television on Wednesday, May 5, 2021 commended CBN for the stability witnessed in the FX market in recent times, but added that the supply side should be tackled for an enduring foreign exchange market.
