Diaspora remittances: Legitimate future for Nigerian BDCs

The recent projection that diaspora remittances is likely to grow higher in future has made it necessary for the country to have other channels of remittances as part of measure to deepen the nation’s forex market. In this report AMAKA IFEAKANDU writes on other possible channels for diaspora remittances.

BDCs industry access to forex

The Bureaux De Change (BDCs) segment of the foreign exchange market in the last 30 years operations have continued to support the nation’s growth agenda and the Central Bank of Nigeria (CBN) commitment towards ensuring exchange rate stability in the country.
For the BDCs to continue to play these credible roles, there is need  to improve the BDCs industry access to forex.

Multiple streams of forex earnings

It is believed that having access to multiple stream of forex earnings would go a long way to deepen the market, mantain stable exchange rate and boost BDCs operations on the process. 
They also argued that making BDCs one of  the channels through which over $25 billion annual Diaspora remittances enter the economy will give depth to forex market.
They explained  that since oil has remained the mainstay of the nation’s  earnings, accounting for over 80 per cent of Nigeria’s forex earnings, the unpredictability of oil prices raise the risk of relying solely on it for Nigeria’s revenue.

This, according to them explained the reason  why the country needs several different sources of forex earnings and the enlisting of more channels to attract Diaspora remittances and other foreign capital that will not only deepen the market but keep the naira stable.

GDP

Available data showed that Diaspora remittances to Nigeria, stood at $25 billion annually for 2018, representing 6.1 per cent of the nation’s Gross Domestic Product
and still remain a reliable source of forex to the domestic economy .
The data showed that Nigeria’s migrant remittance inflow was also 7 times larger than the net official development assistance (foreign aid) received in 2017 of $3.359 billion, while the figure translates to 83 per cent  of the Federal Government budget in 2018 and 11 times the Foreign Direct Investment flows in the same period
 operators have collective view that by allowing  over 4,500 Central Bank of Nigeria (CBN) -Licenced Bureaux de Change (BDCs) to be one of the channels to diaspora remittances would impact positively on the forex market.

Stagnant economy

Concerned with the stagnant state of the nation’s economy marred with inconsistent forex earnings through oil export, the Association of Bureaux De Change Operators of Nigeria (ABCON) recently called for BDCs to be one of the channels for receiving Diaspora remittances into the economy.
Commenting on this issue, ABCON President,  Alhaji (Dr) Aminu 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. He explained that  including BDCs as 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.

Many transactions are unrecorded

He 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.
Investigations have also shown that forex remittances from Nigerians in the Diaspora far exceeded the country’s earnings from crude oil export last year.
It also pointed out that since many transactions are unrecorded or take place through informal channels, the actual amount of remittance flows into  the country is arguably higher. 
But the recent estimation showed that migrant remittances to Nigeria could grow to $25.5 billion, $29.8 billion and $34.8 billion in 2019, 2021 and 2023 respectively.  
For instance,  that the nation’s total oil earnings for 2018 stood at $15 billion, 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).

Diaspora remittances remain cheap source of fund

Gwadabe said, from available data “Diaspora remittances contribute more to this economy than what the oil sector is yielding. The Nigeria National Petroleum Corporation (NNPC) inflow in 2018 is about $15 billion while migrant remittances, Diaspora remittances is nothing less than $25 billion annually into this country’s economy, and this inflow is steady and adds to the country’s Gross Domestic Product (GDP)”. 
Speaking further, he said Diaspora remittances remain cheap source of fund, because it is not to be paid back with interest but goes directly into the construction of houses, payment of school fees, medicals and a lot of things that are adding value to the weak economy.
The ABCON boss explained that Diaspora remittances represent household income from foreign economies arising mainly from the temporary or permanent movement of people to those economies. The remittances cash and non-cash items that flow through formal channels such as electronic wire, or through informal channels, such as money or goods carried across borders,  adding that Nigeria can cover a large part of capital flow gaps through remittances from its citizens in diaspora using the BDCs.

Remittances are known to help poorer recipients

In his explanation, he said “Nigerian BDCs operators have also identified with the immense opportunities presented by Diaspora remittances and want to play greater role in attracting more foreign capital into the economy. Reason being that remittances are known to help poorer recipients meet basic needs, fund cash and non-cash investments, finance education, foster new businesses, service debt and essentially, drive economic growth.” 
He said that Nigerian BDCs, like their counterparts in other emerging or developing economies,  have what it takes to deepen the forex market through remittances and collections. 
“When that happens, it will not be the first time that BDCs were given the opportunity to turn the remittances market around for good.

BDCs generate over $30 billion from the Diaspora remittances in India

Comparing what is obtainable in Nigeria with other countries, he said in India, the BDCs generate over $30 billion from the Diaspora remittances. In United Arab Emirates, the entire banking needs of banks are met by the BDCs. The working of the Lebanon economy is highly dependent on the activities of BDCs in that country. Therefore, Nigeria can also achieve higher revenue through BDCs given the opportunities we seen in the remittances market.”
He regretted that the cost of sending money from the Diaspora to Africa is rising. In the first quarter of 2018, the average cost of sending $200 was 7.1 per cent, and remittance services in Sub-Saharan Africa were the costliest in the world at an average cost of 9.4 per cent. 

N305 to a dollar rate is not transactional rate

He insisted that renegotiating exclusive partnerships and letting new players operate through national post offices, banks, BDCs, and telecommunications companies will increase competition and lower remittance prices.
Stating ABCON’s position on N305 to a dollar proposed in Barrister J.U. Ayogu petition against the CBN Governor, Godwin Emefiele and its management team over the deployment of dual exchange rate regime in forex allocation, Gwadabe, faulted the proposal , saying that N305 to a dollar rate is not transactional rate but used for settling government obligations.
The petitioner had pleaded with the Senate to compel Emefiele to review the policy of dual exchange rate without delay to keep BDC operators in business.
But ABCON Management, 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.
The association disassociates itself from such petition, insisting  that “This is hand work of unknown faces not ABCON. It is confrontational and lack credible evidence.”
He further said that the petitioner was never at any time appointed to speak on behalf of BDCs,”

Also speaking on Diaspora remittances, West African Institute for Financial and Economic Management (WAIFEM) Director-General, Dr. Baba Musa, explained that in economics, Diaspora remittances are called non-debt creating flow which comes in like Foreign Direct Investment (FDI).