A report said the value of annual dollar remittances from Nigerians working abroad has risen to $ 34 billion, a figure that slightly surpasses the previous record high of $ 25 billion. However, a large proportion of the funds do not appear to be entering the domestic currency markets.
Target achieved two years ahead of schedule
The increase attributed to the “Naira for Dollar” incentive program of the Central Bank of Nigeria (CBN) once again underscores the growing importance of diaspora remittances to the most populous country in Africa.
As Biodun Adedipe, an economist at Adedipe Associates Limited, explains, the CBN’s incentive program may be the reason why the goal of $ 34 billion in annual diaspora remittances was met two years ahead of schedule.
However, despite this surge in remittance inflows, Nigeria continues to struggle with currency shortages. This shortage of foreign exchange contributes to the ongoing devaluation of the naira and the resulting rise in inflation.
Dollars sent remain outside the Nigerian foreign exchange market
To explain why Nigeria is not benefiting fully from the surge in remittances, Adedipe points out that many of the dollars sent do not end up in the Nigerian foreign exchange market. Adedipe stated:
For example someone wants to send money to their family here in Nigeria, that person, say, has $ 10,000 in the US and wants to give their family member here in Nigeria the naira equivalent, usually the way it works in other country, that US $ 10,000 will flow into the foreign exchange market in Nigeria and stimulate supply here.
However, this is not happening because “the reality in Nigeria is that the dollar is not staying where it is,” explains Adedipe. “The person who provides the naira equivalent here would prefer to leave the dollar equivalent out there so that it does not end up on the foreign exchange market in Nigeria.” According to Adedipe, the Nigerian authorities now have to find ways of “remittal of Nigerian migrant workers to make generated foreign currencies more attractive “.
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