CBN: New Policy on Remittance Inflow to reduce cost, check Round- Tripping

Further to the introduction of its new “CBN Naira 4 Dollar
Scheme” which comes into effect on Monday, March 8, 2021, the Central
Bank of Nigeria has said the move is aimed at providing Nigerians in the
Diaspora with cheaper and more convenient ways of sending remittances
to Nigeria.

The CBN Governor, Mr. Godwin Emefiele stated this at the weekend while
delivering the keynote address to the Fidelity Bank’s Inaugural Diaspora
Webinar on the Implications and Impact of the New FX Policy on Diaspora
Investments.

Mr. Emefiele explained that the move was also to increase the
transparency of remittance inflows and reducing rent-seeking activities.,
even as he expressed optimism that the new policy measure will
encourage banks and financial institutions to develop products and
investments vehicles, geared towards attracting investments from
Nigerians in the diaspora.

He said the new policy is expected to enlarge the scope and scale of
foreign exchange inflows into the country with a view to stabilizing the
exchange rate and supporting accretion to external reserves. More
importantly, he said it would provide an opportunity for Nigerians living
abroad to make investments in their home country.

Reiterating the provision of the new circular, the CBN Governor said the
Bank introduced the rebate of N5 for every $1 of fund remitted to Nigeria,
through International Money Transfer Operators (IMTOs) licensed by the
Central Bank in order to incentivize the process of remittance. He
explained that the rebate will be provided to the bank accounts of
beneficiaries, following receipt of remittance inflows.

Emefiele emphasized that the new measure would help to make the
process of sending remittance through formal bank channels cheaper and
more convenient for Nigerians in the diaspora.

Citing cases in other climes, Mr. Emefiele said the use of reimbursements
of remittance fees had been critical in supporting improved inflow of
remittances to countries in South Asia and in improving their balance of
payments position following the COVID-19 pandemic.

While noting that the average cost of sending $200 worth remittances to
Nigeria from the United States was about 4.7 percent, he said studies had
shown that even a one percent decrease in cost of sending remittance
could result in a significant boost in inflows.

“Countries in South Asia such as Pakistan and Bangladesh are aware of
this impact and they introduced reimbursement schemes to support
inflows. In Pakistan the scheme which is known as free send has enabled
record amount of inflows of over $2bn a month even during the COVID
pandemic.

“Bangladesh introduced its own scheme in June 2019, which is a 2
percent rebate on remittance inflows. Following this action, they have also
seen a 20 percent boost in remittance inflows,” he explained.
Commenting on the issue of round-tripping, the Bank’s spokesman and
Ag. Director, Corporate Communications Department, Osita Nwanisobi
explained that there was a maximum amount that could be remitted
through an IMTO, adding that no customer could send $100,000 through
an IMTO.

Though he admitted that the CBN action does not go far enough in
offering total reimbursements, Nwanisobi said it was a step in the right
direction in reducing the cost burden for Nigerians remitting funds to
Nigeria.

While also noting the existence of initial challenges of network
integration, Nwanisobi reiterated Emefiele’s assurance that the CBN would
continue to work assiduously to resolve the few challenges that were
remaining.