CBN incentive for dollar remittances

No. 20 P.O.W. Mafemi Crescent, Off Solomon Lar Way, Utako District, Abuja

The Central Bank of Nigeria (CBN) recently launched a ‘Naira for Dollar’ programme aimed at motivating increase in the remittance of foreign exchange to Nigeria.

According to a correspondence dated March 5, 2021, from the Trade and Exchange Department, the apex bank will pay to every recipient of forex delivered through commercial banks and International Money Transfer Operators (IMTOs), the sum of N5 for every US $1 received either as cash over the counter or through transfer into an account. Intended as an experimental venture it will last for three months from Monday, March 8th to Saturday, May 8th 2021. The CBN claims that the programme is intended to sustain and increase the rising tempo of forex remittances into the country as well as support exchange rate stability.

Behind the move is the intention of the CBN to boost diaspora remittances which are estimated at $2 billion annually presently to an ambitious value which some put at over $10 billion over the same period.

However, while the intention of the CBN to bolster the inflow of forex into the country attracts commendation from several stakeholders, there are concerns over the workability of the ‘Naira 4 Dollar’ scheme as conceived, as well as the spin-offs from it.

The commendations are based on the prospects of the venture attracting more competition from the remitters. However, some persons feel the incentive of N5 for every dollar may not amount to much given that even with its addition it amounts to little above 1% mark up of the official exchange rate which hovers around N380 to US$1 when compared with the parallel market where the exchange rate fluctuates between N475 to N480 to a dollar. It is also expected that the new initiative will open the market to more competitive participation by more remitters of forex.

On the flip side, however, is the concern that the CBN should bolster the prospects of success for the exercise with the guarantee of vigilance to stem whatever fallouts from sharp trade malpractices such as round-tripping. In the same vein, the CBN should revamp its internal control of the operating environment – specifically the commercial banks and the IMTOs, to ensure the protection of members of the general public participating in this venture, especially as it may provide room for money laundering.

However, beyond any optimism from the new dispensation is the benumbing reality that the traditional use of forex in the country has been to fund, in the main, the consumption of ostentatious luxury goods and services given the import-dependent state of the Nigerian economy. In the same context lies the concern that much as some improvement may be recorded in the efforts by the CBN to boost forex remittances, not much may be achieved in expanding the productivity credentials of the economy, whose productive base is presently at a low ebb. There is therefore the fear that the ‘Naira 4 Dollar’ exercise may just be a bonanza for more profitable trading in the dollar for speculators, along with more opportunities for access to foreign goods and services.

That is why the government should not rest on its oars as by this ‘Naira 4 Dollar’ venture, it now faces the more profound challenge of fast-tracking the actualization of its economic recovery programme, with the spin-offs from the enhancement in the forex market. With the mainstream of local productivity presently wallowing in the doldrums, the country’s only hope for survival is to shake off the yoke of living on foreign productive enterprise. To do otherwise is to plan for the economic prosperity of the country without the concrete consolidation from the straws of enhanced domestic productivity.