Introduction
The foreign exchange inflow through diaspora remittance has to some extent helped to increase the nation’s earnings and forex supply. The World Bank’s recent projection that global remittance is likely to decline by about 20 per cent has called for an urgent need for Nigeria to expand avenues for migrant remittance to increase collection. In this report AMAKA IFEAKANDU writes on the need for the government to adopt multiple channels of diaspora remittance by including BDCs and others.
The earnings from Diaspora foreign exchange remittances have for years supported the nation’s economy and contributed to increase forex supply.
Remittance inflows are one of the major macro economic factors that significantly promote economic growth in a developing economy like Nigeria. Apart from recognizing international remittances as an important driver of the economy of most developing countries, it plays vital roles in poverty reduction, income redistribution economic development, especially in rural areas.
Growth estimates in Nigeria
The PWC estimated that migrants remittance to Nigeria could grow to $25.5 billion, $29.8 billion and N34.8 billion in 2019. 2020 and 2023 respectively. Reports showed that in the last four years remittances exceeded Nigeria Oil’s revenue.
Impact of Covid 19 on diaspora remittance
But with the sudden outbreak of Coronavirus across the world the forex inflow has declined drastically, especially the inflows of the oil revenue and diaspora remittance into the country.
However, the World Bank recent projection that the global remittance will decline sharply by about 20 per cent in 2020 due to economic crisis caused by Coronavirus pandemic and shutdown expressed the need for Nigeria to broaden their avenue through which migrant remittance flows into the economy. Nigeria which earned $25 billion in 2019 from remittance market need to create an avenue for the country to open more channels for forex remittance to boost Collections.
Operators view
Operators in the Bureaux De Change segment of forex market said that breaking the monopolies system of fewers
Players in the remittance market would have positive impact in our economy.
They insisted that allowing multiple and digitized channels to receive funds and adopting virtual Know Your Customer rules will help to some extent to rescue the economy from shortages in dollar supply and revenue leakages.
The 2018 and 2019 earnings according to them stand as an eye opener to many people that migrant remittances is the backbone of the country’s foreign exchange inflows and should be protected.
President, Association of Bureaux De Change Operators of Nigeria (ABCON) Alhaji (Dr.) Aminu Gwadabe insists that now is the time to break the current industry monopoly that puts the remittances market in the hands of few players depriving others from tapping into the goldmine. For him, there is urgent need to get more players to join the remittance collection market including getting BDC operators approved for the business.
He said making Bureaux De Change (BDCs) one of the channels through which Diaspora remittances enter the economy will give depth to forex market and boost BDCs operations.
The ABCON boss insists that for Nigeria to get the full value of what is due to her in the remittance market, BDCs have to be included in the remittances payment channels and allowed to receive funds from Nigerians in Diaspora. The BDCs are to perform this role through contactless and digitized channels to make collections easy and seamless.
“Now is the time for government and financial sector regulators to promote contactless payment channels, leveraging on digitization in the receipt of migrant remittances. The first win will be getting BDCs included in the payment channels to break monopolies of the fewer players, use of Simple Virtual Know Your Customer rule for beneficiaries and implementing supportive regulations,” Gwadabe said.
The ABCON boss also called for the establishment of training institutes to enhance capacity and infrastructure in the industry and broadening players’ business scope with cash-back incentives for those that patronize BDCs while also implementing a less cumbersome and complex documentation requirements for end users.
Also commenting on Diaspora remittances, a forex user, Mr Chukwudi Okolo said that Diaspora remittances remain crucial in economic development, but there was need to look at how they are coming in.
He said that the source of many of the funds are never known, hence the need to broaden the remittance channels.
He explained that money senders want their beneficiaries to get a favorable exchange rate and more value in the local currency and such can only be achieved in a competitive market where recipients have several options including BDCs and other approved segment of forex market.
He said that competitive market create an opportunity for choice making, adding including BDCs in the remittance market will make easier for collection
World Bank Group President David Malpass, said remittances are a vital source of income for developing countries. He explained that the ongoing economic recession caused by COVID-19 is taking a severe toll on the ability to send money home and makes it all the more vital that we shorten the time to recovery for advanced economies. He explained that remittances help families afford food, healthcare, and basic needs.
Opportunities in Diaspora Remittances
According to Gwdabe, there are over 1.24 million Nigerian Migrants abroad and 50 per cent of them lives within the African neighbour hood, and the figure is expected to rise in the coming years.
The migrants’ cumulative remittances figures into the Nigerian economy by the World Bank estimates indicated $22 billion in 2017, $23 billion in 2018 and $25 billion in 2019. However there is a huge differential between the Word Bank statistics and the local sources due to lack of data and operators indulgence in non reporting and non rendition practices to the official window.
Gwadabe listed importance of migrant remittances to the economy to include serving as a lifeline for the recipients small house hold in the economy and used for health, nutrition, education and societal needs.
The remittances are also higher than both Foreign Direct Investment and foreign aids flow to the economy and still, are cheaper sources of funds.
He said that remittances can be used infrastructural developments as seen in India and Lebanon while in the Dubai UAE, the remittances are stable sources of liquidity in the Market. The remittances, he added, can also serve as excellent source of investments funds in the economy even as it represent 83 per cent of the Federal Government budget in 2018.
Supportive Policy Direction of CBN
The CBN has for years, implemented robust and friendly policies to deepen the players in the market and remains the first regulator in the world to ban exclusive contracts of the dominant players.
The CBN Management led by Godwin Emefiele remains proactive and is taking steps that promote more Diaspora remittances inflow into the economy.
Such move, he said, will address the dwindling outlook of the naira in the post COVID-19 era and help in achieving the vision of making the local currency sovereign in the west African Market.
Gwadabe said the CBN forex policy has brought stability to the BDC industry and helped operators to embrace automation which is the standard best practice globally and adding the BDCs to one of the channels through which the Diaspora remittance funds come into the country will be a good way to reduce the reliance of rate differentials to sustain operators’ businesses.
Diaspora Remittances/Role of BDCs in Economy
Gwadabe said that the BDCs remain at the centre of economic development and have the capacity to attract needed capital for the development of the Nigerian economy.
Findings have also shown that forex remittances from Nigerians in the Diaspora far exceeded the country’s earnings from crude oil export last year.
For instance, the total oil earnings of the nation stood at $15 billion in 2018, while the total remittance from Nigerians in Diaspora amounted to $25 billion in 2018. Nigeria earned a total of N5.54 trillion ($15.4 billion) from oil revenue last year, according to figures released by the Central Bank of Nigeria (CBN).
Gwadabe said the CBN forex policy has brought stability to the BDC industry and helped operators to embrace automation which is the standard best practice globally and adding the BDCs to one of the channels through which the Diaspora remittance funds come into the country will be a good way to reduce the reliance of rate differentials to sustain operators’ businesses.
