The total value of dollar remittances from Nigerians working abroad has risen to $34 billion, comfortably surpassing the previous high of $25 billion.
Despite the spike, a major chunk of the funds does not appear to be entering the already constricted domestic FX markets. The surge, credited to the Central Bank of Nigeria’s (CBN) “naira for dollar” incentive plan, underscores the growing importance of diaspora remittances to Africa’s most populous country.
Mr. Biodun Adedipe, an economist at Adedipe Associates Limited, is quoted as saying that the CBN’s incentive plan could be the reason why the $34 billion in annual diaspora remittances objective was met two years ahead of schedule.
Despite the increase in remittance inflows, Nigeria continues to face foreign exchange shortages, which has contributed to the naira’s continuous depreciation and the rise in inflation that has resulted. In an attempt to explain why Nigeria isn’t reaping the full benefits of increased remittances, Adedipe points out that much of the money remitted never makes it to the Nigerian foreign exchange market.
“For example, if someone wants to send money to his or her family in Nigeria, and this person has $10,000 in the US and wants to send the naira equivalent to his family member here in Nigeria, normally the way it works in other countries is that $10,000 will come into the forex market within Nigeria, and become a boost to supply here,” Adedipe explained.