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Tag: remittances

  • Enhancing remittances inflows for national development

    Enhancing remittances inflows for national development

    • By Dr. Vincent Nwani

    Foreign savings have historically been considered important for increasing a country’s capital production ratio in development economics studies. These studies have taken into account some elements including Foreign Direct Investment (FDI), official development assistance (ODA), foreign commerce, the transfer of technology, and, more recently, remittances.

    Remittances typically refer to the portion of migrants’ earnings that is remitted back to their country of origin, their family, and communities, either in cash or in kind. According to the International Monetary Fund (IMF), remittances are household income from foreign economies arising mainly from the temporary or permanent movement of people to those economies. Remittances include cash and non-cash items that flow through formal channels such as electronic wire, or informal channels, such as money or goods carried across borders.  International migrant remittances have steadily grown to become an important source of external finance in Nigeria and other developing nations. 

    Over the past 20 years, remittance flows have multiplied five-fold, acting as a countercyclical force during global economic downturns in recipient nations. This makes it important to continue to analyse the potential of migrants’ remittances to contribute to development. Today, they represent the largest source of external finance for many developing countries, ahead of Official Development Assistance (ODA) and Foreign Direct Investment (FDI).

    While private capital mainly flows to emerging countries, remittances are particularly important in poorer countries where they represent over a third of the Gross Domestic Product (GDP). They also form an important contributor to resilience in the face of economic or humanitarian crises. Remittances have proven to be more dependable and consistent than other forms of external financing like foreign direct investment, public debt, or official development assistance, according to a UNCTAD (2011) report. Remittances to low- and middle-income countries (LMICs) withstood global headwinds in 2022, growing an estimated five per cent to $626 billion (World Bank, 2022). According to the latest World Migration and Development Brief, remittances to Sub-Saharan Africa, the region most affected by the global crisis, were expected to increase by 3.9 per cent to $53 billion in 2022, up from 16.4 per cent in the previous year, due mainly to strong flows to Nigeria and Kenya.

    Though Nigeria’s economy largely depends on earnings from the export of minerals-crude oil and gas, for her foreign reserve stock, other notable sources of inflow include autonomous sources such as foreign loans and advances, foreign capital importation-foreign direct investment and foreign portfolio investment, capital gains, and diaspora remittances. However, diaspora remittances were among the nation’s top sources of non-oil foreign exchange. 

    The Central Bank of Nigeria (CBN) in recent years has been making concerted efforts to boost its reserves by using a combination of demand and supply side measures to strengthen the foreign exchange market due to unpredictable movement in prices of crude oil, which has for many years been the main source of foreign exchange for the country and any shock to that singular source of forex often causes a disproportional effect on foreign reserves as well as the exchange rate of the naira to the dollar.

    Consequently, in recognition of the strategic significance of the Nigerian diaspora, the Nigerians in Diaspora Commission Establishment Bill was passed into law by the Federal Government in July 2017. The law created the Nigerians in Diaspora Commission (NiDCOM), which was formed to engage and utilise the human, capital, and material resources of this demography in the socioeconomic, cultural, and political growth of Nigeria (Pwc, 2019).

    According to data from the CBN, diaspora remittances first outpaced oil revenue in 2015 as $21.2 billion was sent home officially by Nigerians living abroad, surpassing the $19.6 billion oil export proceeds for those 12 months. Nigerians abroad sent home $19.7 billion and $22 billion in 2016, respectively, more than the $10.4 billion and $13.4 billion earned from oil exports during the same period. The CBN’s annual economic reports show that in 2018 the total revenue from oil was $18 billion while Nigerians abroad sent home $25.1bn, the highest in four years. 

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    The administration of President Bola Tinubu in its Agenda Roadmap indicated that the government is open to explore innovative measures targeted at harnessing and optimising the potentials of Nigerians in the diaspora as part of its initiative for stabilising the foreign exchange market and grow the economy sustainably. It is expected that diaspora remittances can double within a period of five years from the current annual average of $20 billion. We believe that this laudable objective is a low-hanging fruit and largely achievable through the implementation and combination of the following suggestions. 

    Reintroduction of the naira rebate scheme and making it more attractive: The World Bank noted that the introduction of the naira rebate scheme and e-naira encouraged migrants and remittance service providers have easy access to bank accounts. It noted that diasporans are naturally empathetic to sending more money to their home countries during rising inflationary trends to cater to their relatives. This ordinarily is expected to lead to an increase in remittance flows into the country during this period of high inflation. A look at remittances inflows after the announcement of the Naira-4-Dollar scheme shows that remittances through the banking system jumped from $4.94 billion in the second quarter of 2021 to $5.16 billion, at the end of the first quarter of 2022. Thus, the reintroduction of the suspended Naira Rebate Scheme with necessary adjustments in the policy framework can be considered by the CBN.

    The average transaction cost for sending $200.00 to Nigeria currently stands at 7.80 per cent, amounting to N15.6. Lesson from Bangladesh shows that incentives for remittances are pegged at levels not less than 50.00 per cent of the transaction costs at any point in time. While the average cost of remittances to Bangladesh is currently at 4.30 per cent, the government in 2021 increased the bonus for money sent to Bangladesh by Bangladeshis abroad from 2.00 per cent to 2.50 per cent. To maximise the inflow of remittances under the Naira Rebate Scheme, increasing the bonus rate from N5.00 per dollar to a higher figure should be considered by CBN.

    Implement diaspora support and engagement initiatives: NiDCOM can achieve a sustainable flow of remittances into Nigeria and ensure that its diaspora is engaged in an ongoing basis by creating an effective digital platform that cater for germane needs of the diasporans on real time. The platform should be able to elicit the interest of Nigerians abroad and trigger them to participate more in their home country. Nigerians abroad are seeking for platforms that ensure their participation in electoral process, i.e, voting in local elections, registration   management, i.e,   National   Identification   Number (NIN) enrolment and issuance, facilitation of pension claims, etc, and facilitation of international passport services. This platform will help boost the morale of Nigerians in the diaspora to participate more in the affairs of their home country including channelling their funds to viable investment programmes.

    Expand motives for sending remittances into the country: According to WorldRemit, the immigrants from West Africa in the United States and the United Kingdom listed daily expenses, gifts, medical expenses, and education of relatives in their home country as top reasons they sent money home in 2021. Only about three per cent of remittances inflow into Nigeria are directed towards investment while the rest are spent on relatives, family celebrations, and real estate acquisition. The major barriers to investing by the diasporans are the lack of credible real-time investment information, the absence of enabling investment products and platforms, and the minimum threshold of funds set by investment firms.

    Reduce Cost of Processing Remittances: The global average cost of sending $200.00 was 6.00 per cent in 2022. It is cheapest to send money to South Asia at 4.30 per cent and most expensive to send to Nigeria and Sub-Saharan Africa, 7.80 per cent. Moderating transaction charges by IMTOs towards the level obtainable in South Asia can be explored by the CBN. It is believed that reducing transaction charges will not only boost the volume and value of remittances inflow into the country but ultimately improve liquidity in the foreign exchange market.

    •Nwani is an economist and investment specialist

  • Revenue audit: Customs bans banks for remittances default

    Revenue audit: Customs bans banks for remittances default

    Nigeria Customs Service (NCS) has deactivated some revenue-collecting banks from the service of the organisation following audit report that showed the banks were holding back government revenues.

    The NCS yesterday stated that the Acting Comptroller General, Bashir  Adeniyi took the decision because the selected authorized dealer banks failed to meet the Service-Level Agreements (SLAs) related to Customs’ duty and statutory charge remittances.

    The NCS, however, did not name the banks, although it cautioned stakeholders against using the deactivated banks.  

    According to the NCS, the decision follows a thorough audit and due process, aligning with the NCS’s commitment to upholding transparency, accountability, and efficiency in revenue collection.

    The Service explained that the primary objective of the audit and the subsequent decision were to  ensure accurate and timely remittance of Customs duties and other essential funds for national development.

    In the statement signed by the National Public Relations Officer and Chief Superintendent of Customs, Abudullahi Maiwada, the NCS noted that  despite the deactivation of these banks, the Comptroller General has implemented measures to minimize disruptions for importers and stakeholders within the trading ecosystem.

    The NCS assured the trading community that all pending assessments will undergo clearance processes in line with international best practices.

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    The statement added that importers who previously relied on the deactivated banks for duty payments are advised to utilize other authorized dealer banks that comply with NCS regulations. Stakeholders encountering challenges with a particular bank are encouraged to use alternatives that function appropriately.

    NCS said the deactivated banks will have the opportunity to be reactivated once they meet all regulatory requirements and settle outstanding remittances.

    According to the Service, collaborative efforts with financial regulators and stakeholders are underway to ensure the efficiency and integrity of the Customs Duty Collection system.

     The NCS placed a priority on trade facilitation, putting stakeholders and Nigerian citizens first, even in the face of non-compliance by some Authorized Dealer Banks.

    The statement further said this action underscores the NCS’s commitment to maintaining a fair and transparent customs revenue collection process.

  • Remittances to African economies dip at 6.1% to $33b

    World Bank Statistics have shown that remittance to African countries have declined by an estimated 6.1 per cent to $33 billion.

    The figure, which was for last year, was triggered by slow economic growth in remittance-sending countries and a decline in commodity prices.

    It said rising sources of income for Africans are being realised through remittances, which have been observed as important aspect that impacts lives as well as brings about economic growth and development on the continent.

    The theme of remittances was discussed by researchers and economists at the 12th African Economic Conference in Addis Ababa, Ethiopia, titled: “Financing Arica’s Development–Remittances and Natural Resources”.

    A researcher from the University of Lagos, Taiwo Ojapinwa, said although remittances to Africa have recently declined, they still constitute a major component of income to households and investments compared to other external revenue flows.

    “There is now need to find ways on how remittances can directly contribute to economic growth, which for decades have not been the case. There is need to have strong institutions and rule of law because the amount of remittances a country receives can be influenced by the quality of governance,” Ojapinwa said.

    He added:“Remittances’ contribution to the economy can also depend on the protection of property rights, strong judicial independence, well-organised labour markets, low levels of corruption and a sound macroeconomic environment.”

    His fellow researcher, Raphael Babatunde from the University of Ilorin, added that remittances have become a major livelihood strategy among African households – and that this source of income helps to supplement agricultural incomes for many farmers.

    “Remittances sent by migrants are important in fighting nutrition, poverty and food insecurity. They are believed to have a huge impact on the socio-economic conditions of families left behind in the countries of the migrants’origin,” he said.

    He added:“Although agriculture remains the most important single source of income for many communities in Africa, farming households that receive remittances have a slightly larger share of income than those that do not receive remittances.”

    A Professor of Economics at the University of Leeds, Malcolm Sawyer, in his submission on the research papers, said although remittances have been fundamental in changing lives, their impact in Africa is affected by high costs imposed on migrant remittances.

    “The remittances to Africa are not being used as efficiently as possible, largely due to high charges. Basically, sending money to Africa is a bit expensive, probably the costs are among the highest in the world,” he said.

    He continued:“Policy-makers in individual countries and region should be looking at how these costs can reduce and how these financial flows can be exploited to boost growth and the socio-economic development of their people.”

    The Chief Renewal of Planning Section at the United Nations Economic Commission for Africa (ECA), Bartholomew Armah,  added that African governments should continue to introduce measures to attract Diaspora investments at home by offering them incentives and reducing remittance charges.

  • Lawmakers summon telecoms chiefs for alleged defaults in taxes, remittances

    Some heads of telecoms companies have been summoned by the House of Representatives ad hoc committee investigating the operations of telecommunications service providers, equipment and vendors.

    9mobile, Etisalat Nigeria and Globacom Nigeria bosses are to appear before the committee for alleged non-payment of taxes and the required percentages of their profits to Federal Government.

    The chairman of the committee, Ahmed Abu, said  the summon became necessary because the companies failed to attend the various hearings of the companies, in spite of repeated invitations to them.

    According to the lawmaker, the letters to convey the summons to the firms, for a meeting with the committee were being compiled.

    He added that further disregard for the invitations might compel the committee to issue bench warrants against the companies.

    The lawmaker also wondered why the National Lottery Trust Fund has been unable to rake in appreciable revenues for the government based on existing legislations regulating the operations of the firms and lottery activities in the country.

    However, the Executive Secretary of the fund, Habu Gumel, in his submission, said the government has only got N530 million in the last nine years from the companies doing business in the country.

    According to him, poor remittances, which represent value for lottery money, was on account of “issue of under-declaration of remittances by operations,  lack of credible database to ascertain the actual and precise amount due to government as returns for good causes”.

    Gumel’s position was supported by the representative of National Lottery Regulatory Commission (NLRC), Okechukwu Odunna, who decried mechanisms for tracking businesses of the telecommunications firms, from where parts of the proceeds were to be measured by the government.

    The ad hoc committee chairman said those invited should have no fears that his panel was working at crossroads with the statutory committee of the House which oversights the companies.

     

  • Diaspora remittances to Nigeria fall 10%

    Diaspora remittances to Nigeria fall 10%

    Remittances to Nigeria and developing countries fell for a second consecutive year in 2016, a trend not seen in three decades, according to the latest edition of the Migration and Development Brief released yesterday by the World Bank, at the ongoing IMF/ World Bank’s Spring Meetings in Washington DC, U.S.

    The report showed that many large remittance-receiving countries saw sharp declines in remittance flows.

    Remittances to Nigeria, it said , went down by 10 per cent in 2016; Bangladesh 11.1 per cent, and Egypt, 9.5 percent.

    “Remittance flows to Sub-Saharan Africa declined by an estimated 6.1 per cent to 33 billion dollars 2016, due to slow economic growth in remittance-sending countries; decline in commodity prices, especially oil, which impacted remittance receiving countries.

    “The diversion of remittances to informal channels due to controlled exchange rate regimes in countries such as Nigeria contributed to decline in the region.

    “However, remittances to the region are projected to increase by 3.3 per cent to

    34 billion dollars in 2017.”

    The report showed however, that Mexico and the Philippines were the only exceptions, which saw inflows increase by an estimated 8.8 per cent and 4.9 per cent last year.

    The Bank estimates that officially recorded remittances to developing countries amounted to 429 billion dollars in 2016, a decline of 2.4 per cent, from over 440 billion dollars in 2015.

    Global remittances which include flows to high-income countries, also contracted by 1.2 per cent to 575 billion dollars in 2016, from 582 billion dollars in 2015.

    “Low oil prices and weak economic growth in the Gulf Cooperation Council countries and the Russian Federation are taking a toll on remittance flows to South Asia and Central Asia.

    “Also, weak growth in Europe has reduced flows to North Africa and Sub-Saharan Africa,” the report stated.

    According to the report, the decline in remittances, when valued in U.S. dollars, was made worse by a weaker Euro, British pound and Russian ruble against the U.S. dollar.

    The acting Director of the World Bank’s Global Indicators Group, Ms Rita Ramalho, said that the decline in remittances could affect the livelihood of many families.

    “Remittances are an important source of income for millions of families in developing countries.

    “As such, a weakening of remittance flows can have a serious impact on the ability of families to get health care, education or proper nutrition,” she said.

    Ramalho said that with an improved global economic outlook, remittances to developing countries were expected to recover in 2017, growing by an estimated 3.3 per cent , which is about 444 billion dollars in 2017.

    The world bank report also gave statistics on current global migration.

    Between 2015 and 2016, the number of refugees in the 28 European Union countries were said to have increased by 273,000 to 1.6 million.

    During the same period, the number of refugees worldwide increased by 1.4 million, to 16.5 million.

    The report called for regional and bilateral agreements to address migration, develop a normative guidelines for governments and international organisations.

    Mr Dilip Ratha, Head of the World Bank Global Knowledge Partnership on Migration and Development, said migration would continue to be on the increase due to large income gaps, widespread youth unemployment, ageing populations in many developed countries.

    He said that climate change, fragility and conflict would continue to affect migration, going forward.

  • $21b Diaspora remittances: The odds against banks

    $21b Diaspora remittances: The odds against banks

    The failure of 22 commercial banks to comply with the Central Bank of Nigeria’s (CBN’s) directive to sell $50,000 weekly to Bureaux De Change (BDCs) is worrisome. Also disturbing are their alleged breach of the Treasury Single Account (TSA) and international money transfers. Besides, they also engage in round-tripping. Stakeholders are urging CBN to stop banks from selling dollars and give the job it to an independent distributor so as to make the Diaspora funds accessible to BDCs, writes COLLINS NWEZE.

    That dollar scarcity has hit an alarming rate is no longer news. What is source of concern to stakeholders is how the billions of dollars coming into the country, especially from Nigerians in the Diaspora, are utilised by the commercial banks that warehouse such funds.

    If well managed, the funds, estimated at $21 billion annually by the World Bank Migration and Remittances Factbook 2016, are huge enough to save the naira which has come under heavy pressure from speculative attacks and the prevailing dollar scarcity.

    The naira closed at the weekend at N420 to the dollar at the parallel market. It has lost over 40 per cent of its value since June. But the Central Bank of Nigeria (CBN) is taking drastic measures to protect the national currency by bringing Bureaux De Change (BDCs) into its market calculation.

    According to the apex bank, the BDC remains a critical agent in the stability of the forex market and economic turnaround for the country. Besides, the operators are also key partners of the CBN in meeting of customers’ forex needs at the retail end of the market.

    The CBN has, therefore, directed commercial banks to sell $50,000 weekly to each of the nearly 3,000 BDCs from the estimated $21 billion inflows from Nigerians resident overseas.

    Over the years, the Money Deposit Banks (MDBs) have been the sole recipient of the Diaspora funds, unlike in other countries where the cash went directly to the BDCs. But recent occurrences, and abuses of regulatory processes, question the suitability of the lenders to continue the disbursement of Diaspora remittances to BDCs as directed by the CBN.

    The first doubt was raised with the publicised indictment of nine lenders by the CBN for failure to remit $2.3 billion belonging to the Nigeria National Petroleum Corporation (NNPC)/Nigerian Liquefied Natural Gas (NLNG) Company into the Treasury Single Account (TSA) as required by law.

    The affected banks were banned from trading in the forex market but were re-admitted the weekend after they presented repayment plans for the funds in their custody.

    The CBN has also accused the banks of violating international money transfer rules by establishing private and company accounts to harvest dollar inflows from abroad without following the Know Your Customer (KYC) requirements.

    Despite CBN’s directive to banks to sell $50,000 weekly from Diaspora remittances to BDCs, the MDBs are adamant, even with from the apex bank that they disburse the funds to the BDC operators to boost liquidity in the forex market and boost the state of the local currency naira against the dollar.

    The CBN also accused the banks of engaging in round-tripping, taking advantage of the huge forex gaps between the official and parallel markets. About 20 to 25 per cent of the volume of forex traded in the country is from autonomous sources, usually diverted into the parallel market through round-tripping.

    According to the President of the Association of Bureau De Change Operators of Nigeria (ABCON), Alhaji Aminu Gwadabe, only 10 per cent of BDCs from the Lagos market have so far accessed dollars from banks since the CBN gave the directive almost a month ago.

    Gwadabe explained: “The proceeds of the international money transfer funds are not CBN money. It is not from the foreign reserves of the CBN. This is money that Nigerians in Diaspora send into the economy. Before, this money came through unofficial means; some send through hands, and at the end of the day, the beneficiary will not even get the money. And in other countries, the Diaspora funds are strictly for BDCs.”

    The ABCON chief has, therefore, called on the CBN to outsource the dollar distribution role to an independent distributor since the banks have failed in the assigned role.

    Involved in the dollar sales are: FirstBank, Ecobank Nigeria, Fidelity Bank, United Bank for Africa (UBA), Unity Bank, Diamond Bank, Zenith Bank and Stanbic IBTC Bank.

    He lamented that none of the BDC operators in Port Harcourt, Kano, Abuja, Onitsha, Maiduguri, Benin and Enugu has received a single dollar from the designated banks.

    Gwadabe also accused the banks of selling the dollar far above the interbank rate. The banks, he said, have a mandate to sell to the BDCs on the same day within the week, but they have failed to do so.

    He said: “Instead of staggering the payment, the banks should sell to the BDCs on the same week day, so that the impact will be felt in the market.

    “Our members across the country have funded their accounts but the banks are not selling to them. The BDCs that met the CBN’s policy guidelines on the disbursement and cleared by the banks have still not received a dime from the banks.

    “I think the banks are compromising the policy and CBN’s directive on the matter. And like I said earlier, since the banks are not cooperating, I expect the CBN to take that role from them and assign it to a reputable independent dollar distributor that will comply with the terms of engagement.”

    The ABCON chief got an ally in the former President and Chairman of Council, Chartered Institute of Bankers of Nigeria (CIBN), Mazi Okechukwu Unegbu, also backed the operator’s suggestion that the dollar selling role from the Diaspora funds be taken away from the banks.

    Unegbu explained that the rising dollar scarcity and the banks’ desperation to declare huge profits would make it difficult for the lenders to handle the Diaspora funds with the desired integrity.

    “This is not the right time to give banks custody of Diaspora remittances because they will always want to abuse the opportunity. The banks are like lions looking for the next available prey to devour and leaving the Diaspora funds with them is not in the interest of the naira and wider economy,” he said.

    Unegbu said he was not surprised that banks are not selling dollars to BDCs because they are also not selling to manufacturers who need the funds to import raw materials and machines to create jobs for the population.

    His words: “I think the banks want to maximize their profits by selling the dollar to end users and make wider margins. I even understand that bank employees want the BDCs to ‘settle’ them before they can even release the dollars to them. This is something the CBN should look into. It should give the dollar to a reputable international money distributor to ensure that the dollars get to the BDCs as such would help strengthen the naira and bring down the soaring dollar price.”

    The former CIBN chief said that with the devaluation of the naira, Nigerians in the Diaspora now have incentives to send home more dollars to build houses, start businesses or even pay school fees of their families and relations at home.

    He said the banks will continue to put pressure on the CBN not to relieve them of the Diaspora funds, even though they lack the integrity to handle the funds.

    The World Bank has identified Nigeria as the third largest destination country for migrants from other African nations. The bank states that a quarter of a billion people around the world are migrants, and over $600 billion in remittances are sent annually.

    The global lender says international remittances to developing countries reached over $441 billion last year, more than foreign direct investment and thrice more than official aid flows.  It says 34 per cent of all international remittances are sent between developing countries.

    CBN’s Acting Director, Trade & Exchange, W.D. Gotring, had directed through a circular to authorised dealers that all agents to approved International Money Transfer Operators (IMTOs) sell $50,000 weekly foreign currency accruing from inward money remittances to licensed BDCs.

    The directive was meant to ensure stability of the exchange rate and encourage participation of critical stakeholders in the forex market.

    Gotring, in a circular to authorised dealers titled: “Re: Transactions in ‘Free Funds’ by authorised dealers”, also accused the banks of buying and selling forex without following stipulated guidelines.

    “The CBN has noticed that some authorised dealers have continued to buy and sell foreign exchange referred to as ‘free funds’ despite the provision of the circular of March 4, 2004 on the subject”, he said.

    Gotring, who cautioned MDBs of the consequences of violating the extant regulations, said: “against the background, authorised dealers are to note that dealing in forex without appropriate documentation, which includes relevant entries, blotters, physical documents and non-disclosure to the regulatory authorities is a breach of extant regulations.”

    He reiterated that as provided in the laws and regulations governing dealings in forex, authorised dealers shall not sell forex without appropriate documentation and disclosure to the regulatory authorities irrespective of the source of the funds. “Accordingly, authorised dealers shall deal in eligible transactions only, and not to engage in any foreign exchange transactions on terms inconsistent with the extant laws and or regulations”, he said.

     Banks abuse international money transfer rules

    The CBN has also accused MDBs of compromise in the ways they handle proceeds from international money transfer inflows into the country.

    A circular to banks titled: Illicit international money remittances through the banking system, and signed by Gotring, accused the lenders of opening multiple illegal company and personal accounts where they harvest dollar proceeds for onward disbursements to local recipients.

    The practice, he said, is against the September 26, 2014 guidelines for the operation of International Money Transfer Service (IMTS) in Nigeria, warning the lenders to desist from such unwholesome practices.

    He said: “Further to the guidelines for the operation of International Money Transfer Service (IMTS) in Nigeria of September 26, 2014, we have observed that some DMBs are operating accounts either as companies or companies masking themselves as individuals for the purpose of illegally receiving money transfer flows into the accounts for onward disbursements to recipients in Nigeria.”

    Gotring therefore ordered the lenders to carry out Know Your Customer’s Business (KYCB) checks on all their customers to ensure that they do not transact in illegal/illicit flows and also freeze compromised/ identified defaulting accounts.

    His words: “The CBN therefore reiterates that the MDBs have the absolute responsibility to conduct KYCB checks on all their customers to ensure that they do not transact in illegal/illicit flows. Consequently, DMBs are hereby directed to identify and freeze accounts receiving illicit flows, submit the mandate and account details of these accounts held in naira or foreign currency to the CBN for onward reporting to the security agencies.”

     Impact on the naira

    Ecobank Nigeria’s Head Currencies, Market, Olakunle Ezun, said in an e-mailed report that the naira weakened significantly to N420 to the dollar in the parallel market despite CBN’s decision to increase dollar sale to $50,000 for BDC operators.

    The local currency has been under constant pressure on the black market for months, where it has consistently faced chronic shortages. The naira was however quoted at N317.09 to the dollar on the interbank or official market.

    Analysts insist that at this time of strong dollar demand during low oil prices, only a liquid market will help naira’s recovery. The Diaspora funds if well managed, they said, could help the out of the forex crisis.

    Managing Director, Financial Derivatives Company Limited, Bismarck Rewane, agreed in an e-mailed report that the rise in inflation to 17.1 per cent in July from 16.5 per cent in June, a 0.6 per cent increase was driven mainly by supply shocks, forex scarcity, speculation and uncertainty premium.

     

    New IMTOs approved

    To remove oligopoly in the money transfer business, the CBN has licensed 11 new IMTOs to join Western Union, MoneyGram and Ria, which were previously cleared by the apex bank.

    The new entrants include: Trans-Fast Remittance LLC; WorldRemit Limited; UAE Exchange Centre LLC; Wari Limited; Homesend S.C.R.L and Small World Financial Services Group Limited among others.

    Gwadabe has praised the CBN’s decision, describing it as a right step in the right direction and in line with ABCON’s campaign that new operators should be allowed into the market.

    CBN’s Acting Director, Corporate Communications, Isaac Okorafor, said the new entrants was in line with the apex bank’s efforts to liberalise the forex market, ensure liquidity and make forex more readily available to low end users.

    WorldRemit, one of the licensed digital remittance service companies, has applauded the apex bank for the action. Its Founder and Chief Executive Officer, Ismail Ahmed, informed that the firm has received a CBN approval to continue with its digital money transfer services in the country.

    WorldRemit launched its service to Nigeria in 2011 when it pioneered low-cost instant deposits to all bank accounts. The service provided Nigerians in the Diaspora with an easy, fast and secure way to send money home as well as bringing in the much-needed forex into the local economy. Supporting the country’s move towards a cashless economy, 100 per cent of transactions were either bank deposits or airtime top-ups.

    Ahmed said: “We commend the CBN for reaffirming the country’s commitment to building an enabling environment and level-playing field for IMTS to Nigeria. The environment will help to bring the estimated 50 per cent of remittances to Nigeria that currently go through unregulated, informal networks into the formal channels.”

     Fine dangles on nine erring banks

    The nine commercial banks barred by the CBN from the interbank forex market may be fined, analysts at Lagos-based CSL Stockbrokers Limited predicted. Other financial experts also estimated that although there was no precedence of the case, the apex bank may impose a fine of abot N450 million on all the nine lenders, (representing N50 million each).

    A former Executive Director with Keystone Bank, Richard Obire, said: “The CBN may want to demonstrate to the banks that it took their offences very seriously and make it painful to them. The regulator may want to make the fines painful to them as a deterrent to others. I see not less than N50 million fine on each of the affected banks, and that’s N450 million in all.”

    Obire said although the banks are already facing hard times, but letting them go without a fine, could provide a wrong precedence for the industry.

    The banks that breached the TSA rules are: UBA ($530 million); FirstBank ($469 million); Diamond Bank Plc ($287 million); Sterling Bank Plc ($269 million); Skye Bank Plc ($221 million); Fidelity Bank ($209 million); Keystone Bank ($139 million); First City Monument Bank ($125 million) and Heritage Bank ($85 million).

    Stakeholders insist that with controversies surrounding banks’ handling of forex transactions, the lenders should be relieved of the role of disbursing the Diaspora funds to BDCs.

     

    BDCS and the economy

    To Gwadabe, BDCs can be strengthened to meet the forex demand at the retail end of the market to boost employment generation.

    The ABCON chief believes that despite the challenges facing the economy, the CBN and BDCs can work together and find sustainable solutions to lift the country out of the ongoing forex crisis to full economic recovery.

    Besides, ABCON has reached the final stage of automation of BDCs’ operations. The association has applied for CBN’s certificate of no-objection on the project.  According to Gwadabe, the automation plan has been accepted by the CBN, pointing out that the comprehensive reforms of the BDCs sector were unveiled earlier in the year.

    ABCON under Gwadabe has also assured that purchased funds would be disbursed to end-users at the approved rate, and for eligible transactions only.

    His members, he assured, will render weekly returns on dollar purchases to the Trade and Exchange Department of the CBN.

    He further stated that the operators will ensure strict compliance to the provisions of the anti-money laundering laws and observance of appropriate KYC principles in the handling of forex transactions.

  • ‘How to harness $21b diaspora remittances’

    Diaspora remittances coming to Nigeria can play an important role in poverty reduction and fostering long-term economic growth, an international expert in agricultural economy, Dr  Kabir Kayode Salman,  has  said.

    The more than 30 million Africans living in the diaspora last year sent about $40 billion to their relatives and friends in Nigeria as remittances.

    With about $21 billion sent home by Nigerians in the diaspora last year, the country is the sixth largest receiver of remittances in the world, according to the Migration of Remittance Facebook 2016.

    Salman, a Senior  Lecturer, Agricultural Economics Department, University of Ibadan, stressed that such remittances could be a catalyst for investment and economic growth by supporting small business start-ups.

    He said Nigeria has experienced inflows of remittances, along with increasing unemployment rates and dwindling household welfare.

    In a study  he  did for  African Growth and Development Policy (AGRODEP) Modelling Group, Salman noted   that economic insecurity has been increasing in Nigeria in recent years, and this could discourage remittance recipients from investing the funds they receive.

    He  said: “Many people may prefer to keep their funds at home or in the bank and to use them solely for satisfying basic household needs or acquiring luxury.”

  • Diaspora remittances hit $21b

    A total of $21 billion was remitted to the country by Nigerians in Diaspora in the last one year, the Secretary to the Government of the Federation (SGF), Babachir David Lawal, has said.

    Lawal who spoke during the 2016 Diaspora Day press briefing yesterday, said the Federal Government has approved waivers for drugs, roofing sheets, and other items imported by Nigerians in Diaspora to aid Internally Displaced Persons (IDPs), for youth empowerment and enterprises development.

    Represented by the Permanent Secretary, Political Affairs, SGF Office, Olakunle Bamgbose, Lawal  said the Federal Government is partnering Nigerians in Diaspora so as to meet the needs of IDPs in the country.

    He said the Federal Government will only partner with Nigerians in Diaspora who are coming with solutions and are ready to contribute to national development.

    He said: “This year’s conference will take a complete departure from our past experiences, when our nationals come home only to highlight the challenges that confront our nation. The government and citizens of Nigeria at home are not ignorant of challenges as a nation. What our nation requires are solutions to specific problems.

    “This year’s conference, in essence, will focus on obtaining firm commitments from Nigerians in Diaspora, directed at solving some of our national challenges. This administration is ready to partner with Nigerians in Diaspora on how they can assist IDPs in the Northeast on how through medical interventions, they can improve healthcare delivery across the country and on how they can assist government in youth empowerment and employment generation.

    He said government has received commitments from Nigerians in line with the new thinking, saying we intend to obtain more commitments during the conference and as a follow-up to ensure that such commitments are redeemed.”

    Lawal, said this year’s conference would be declared open by the Vice President Yemi Osinbajo.

  • Remittances to developing countries rise marginally in 2015

    Remittances to developing countries grew only marginally in 2015, as weak oil prices and other factors strained the earnings of international migrants and their ability to send money home to their families, says the World Bank’s latest edition of the Migration and Development Brief, released yesterday.

    Officially recorded remittances to developing countries amounted to $431.6 billion in 2015, an increase of 0.4 percent over $430 billion in 2014. The growth pace in 2015 was the slowest since the global financial crisis. Global remittances, which include those to high-income countries, contracted by 1.7 percent to $581.6 billion in 2015, from $592 billion in 2014.

    The slowing in remittances growth, which began in 2012, was exacerbated last year by low oil prices, which are taking a toll on many oil-exporting remittance-source countries, such as Russia and the Gulf Cooperation Council (GCC) states.

    As a result, many remittance-receiving countries, including India, the world’s largest remittance recipient, and Egypt saw remittances contract in 2015, as flows from the GCC countries slowed considerably. Remittances contracted by 20 percent to countries in the Europe and Central Asia region, with the heaviest impacts on Tajikistan and Ukraine , as a struggling Russian economy, and depreciation of the Russian ruble against the dollar contributed to the decline in remittances to the region.

    India retained its top spot in 2015, attracting about $69 billion in remittances, down from $70 billion in 2014. Other large recipients in 2015 were China, with $64 billion, the Philippines ($28 billion), Mexico ($25 billion), and Nigeria ($21 billion).

    “Remittances are an important and fairly stable source of income for millions of families and of foreign exchange to many developing countries. However, if remittances continue to slow, and dramatically as in the case of Central Asian countries, poor families in many parts of the world would face serious challenges including nutrition, access to health care and education,” said Augusto Lopez-Claros, Director of the World Bank’s Global Indicators Group.

    Remittance flows are expected to recover this year, after a bottoming out in 2015, with growth driven by continued economic recovery in the United States and the Euro Area, and a stabilization of U.S. dollar exchange rates of remittance-source countries. In addition to currency movements, oil prices are a key downside risk to this outlook. Should the price of oil suffer unexpected declines, remittances from Russia and the GCC would be further buffeted.

     

    The global average cost of sending $200 was about 7.4 percent in the fourth quarter of 2015, down slightly from the previous quarter and 0.6 percentage points below the end of 2014. Sub-Saharan Africa, with an average cost of 9.5 percent, remains the highest-cost region.

    However, major international banks continue to close correspondent banking accounts of money transfer operators (MTO) to limit exposure to money laundering and other financial crimes. A World Bank survey confirms that account closures are widespread, with adverse impacts on remittance costs and flows in rural and remote regions. For example, over the past two years, 84 accounts of 32 Philippine remittance providers (including both banks and MTOs) were closed by 33 foreign banks in 13 major remittance-sending countries, according to the Philippine central bank.

    A special feature on natural disasters and epidemics notes that migration and remittances have long played important roles in helping to cope with natural disasters, although the vast majority of people displaced by a disaster move for only a short period and remain in their home country.

  •  Diaspora remittances hit $20.8billion

     Diaspora remittances hit $20.8billion

    The World Bank Migration and Remittances Factbook 2016 released yesterday showed that Nigerians living abroad sent home $20.8 billion in 2015. The figure, it said, is by far the largest volume of remittances to any country in Africa and the sixth largest in the world.

    “The United States is the biggest remittance sending country to Nigeria, followed by the United Kingdom. Nigerians  received $5.7 billion in remittances sent from friends and family members in the US and $3.7 billion from the UK in 2015. Nigeria is also the third largest destination country for migrants from other African nations,” it said.

    It said a quarter of a billion people around the world are migrants, and over $600 billion in remittances are sent annually.

    The global lender said international remittances to developing countries reached over $441 billion in 2015, more than Foreign Direct Investment and trice more than official aid flows, adding that 34 per cent of all international remittances are sent between developing countries.

    It disclosed that remittances constitute more than 10 per cent of Gross Domestic Product for 25 countries, pointing out that international remittances have been growing steadily and remain stable even during episodes of financial volatility.

    “In 2015, the number of international migrants surpassed 250 million, a quarter of a billion people, globally. International migrants now represent more than 3.4 per cent of the world’s population. South-South migration is now larger than South-North migration. Over 38 per cent of international migrants have migrated from developing countries to other developing countries. 14.4 per cent of international migrants are refugees,” it said.

    Speaking on the development, Senior Mobile Analyst at WorldRemit, Alix Murphy,  says the World Bank’s latest report shows that countries have now hit two significant milestones – quarter of a billion migrants globally and $600 billion of remittances sent annually.

    “More than ever, we live in world of mobile and connected people whose financial ties extend across the planet. At WorldRemit we see the technological infrastructure evolving to meet these changing demands – in particular the convergence of mobile connectivity, instant messaging and international money transfers,” she said.

    She believes that despite being the biggest economy in Sub-Saharan Africa, Nigeria’s financial system is still deeply fragmented, making sending and receiving money very challenging for ordinary Nigerians. According to her, 56 per cent of Nigerians are unbanked, so offering a variety of pay-out options, including direct to bank account and instant cash pick-up, is extremely important for reaching everyone in society.