The Central Bank of Nigeria has introduced a Naira for Dollar remittance incentive scheme. This involves recipients of remittances inbound to Nigeria through licensed money transfer companies to earn a "bonus" or rebate of five Naira for every American dollar received.
It's also notable that the bonus only applies to remittances that are paid into a bank account in Nigeria.
"In an effort to reduce the cost burden of remitting funds to Nigeria by working Nigerians in the Diaspora, the CBN has introduced a rebate of N5 for every $1 of fund remitted to Nigeria, through IMTOs licensed by the CBN. The Scheme will take effect on the 8th of March 2021. We believe this new measure will help to make the process of sending remittance through formal bank channels cheaper and more convenient for Nigerians in the diaspora," reads a statement by CBN announcing the remittance incentive.
A steep drop in remittances to Nigeria
Since the onset of the COVID-19 pandemic and its related lockdowns, there has been a steep decrease of remittances inbound to Nigeria during 2020 compared to 2019. The drop in remittances has also translated in a drop in household consumption in Nigeria.
It is thus hoped that the new incentive, which kicked off on 8 March 2021 and will run until 8 May 2021, will hopefully boost remittances and in-country spending.
"New FX policy will create an easier, more flexible, and more transparent, system of remittance administration, it will greatly enhance the benefits of diaspora remittances in supporting investments and growth in Nigeria. Policy on the administration of remittance flows is aimed at increasing the transparency of remittance inflows, reducing rent-seeking activities, and providing Nigerians in the diaspora with cheaper and more convenient ways of sending remittances to Nigeria."
Forecasted growth of remittances in Nigeria
The new incentive scheme is not the first regulation announced by CBN aimed at boosting remittances into Nigeria. In November 2020 CBN sent a circular to money transfer companies in Nigeria that inbound remittances into Nigeria can only be made in US dollars and are to be paid to a bank account in Nigeria or collected in foreign currency as cash.
Apart from trying to boost inbound remittances, the CBN at the time also explained that the new regulations were aimed at stabilizing and deepening the foreign exchange market, providing more liquidity, and creating transparency, especially in the administration of diaspora remittances into Nigeria.
PwC has released a report which estimated that remittances to Nigeria could grow by up to $ 34.8 billion in 2023. The consulting company stated that factors that will drive remittance flows include growth in emigration rate, economic conditions of the resident countries, and the economic fundamentals in the Nigerian economy.
It, however, remains to be seen whether new regulations and incentives in Nigeria will facilitate the rebound and growth of inbound remittances.
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