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 Analysts canvass on BDCs participation in $34bn untapped diaspora remittances



With the Central Bank of Nigeria (CBN) stoppage of foreign exchange sales to Bureaux De Change (BDCs), financial analysts have advised the apex bank to allow the BDCs receive diaspora remittances as is done in other economies of the world. The estimated annual remittance by Nigerians in diaspora is $34 billion and a large part of it never makes it into the country. KAYODE TOKEDE writes on financial pundits view on the for CBN to institute framework that allows BDCs, which have automated their operations,  to receive these funds into the economy to boost dollar reserves and save the naira

There are many things working in favour of Nigeria that are  hardly noticed. Top on the list is the $34 billion estimated annual remittance by Nigerians in diaspora that are barely touched because of non-existence channels to attract the funds into the economy.

Globally, Nigeria is one of the few countries that concisely attract funds from migrant workers. Others are Pakistan, Canada, USA, Australia, and Vietnam.

Nigeria is on the side of those that have many migrant workers in the rest of the world, and therefore earn foreign currencies they want to remit home.

But there is a huge problem that limits the funds from getting home.

In a media report, renowned economist and chief consultant at B. Adedipe Associates Limited, Dr. Biodun Adedipe, explained that if Nigeria is able to manage that remittance effectively, it will add 0.4 per cent to our GDP growth annually.

He disclosed that a lot of the dollar don’t come into the FX market in Nigeria. The receiver gets the naira equivalent of the fund even when the funds never got to Nigeria, denying Nigeria the  full benefit of diaspora remittances, despite the country being at the top in terms of benefitting from migrant workers.

“So what then happens is that instead of bringing it into the FX market in Nigeria, they keep it outside. That also becomes a leg that supports speculations that we talked about earlier on. I believe that was part of the reason why the CBN introduced the $1 for N5 incentive. The idea now is to see if the country can harness the most of the remittances,” Adedipe said.

“That now is a policy I think we need to interrogate more. How can we make it more attractive for those foreign currencies generated by migrant Nigerian workers to be remitted home, and become a part of our national supply to our market here? That now is a space for the BDCs.”

Analysts said that what is needed is implementation of laws that stipulated that oil companies and other multinational companies bring dollars into the economy instead of keeping them at Home countries.

This will ensure that what is kept outside the market   would come into Nigeria to boost supply. CBN already has the tools, but they need to enforce it.

ABCON President, Alhaji (Dr) Aminu Gwadabe said globally, BDCs remain one of the channels through which the Diaspora remittance funds come into countries.

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 and deepening of forex market.

Findings have also shown that forex remittances from Nigerians in the Diaspora far exceeded the country’s earnings from crude oil export last year. Since many transactions are unrecorded or take place through informal channels, the actual amount of remittance flows into  the country is arguably higher. The estimation is that migrant remittances to Nigeria could grow to $25.5 billion, $29.8 billion and $34.8 billion in 2019, 2021 and 2023 respectively.

Gwadabe 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.

Again, BDCs are supposed to buy from travelers coming into Nigeria, whether they are foreigners or they are Nigerians who did some things offshore, and were able to make some money, and brought back those foreign currencies.

BDCs are also expected to operate  two-way rate, then in response to what they have told you, you will now disclose whether you want to buy from them or sell to them. The operators are also expected to be in tune with market dynamics, be able to fix its own rate within the recommended commission rate in such a way that is competitive in that market.

Other issues include customer service, relationship management and commission which must be within market range.

Import pressure on forex

But because we were net importers, that brought pressure on the FX market. And like we have also argued overtime, the major worry for the CBN or anyone considering the management of the FX market is the premium.

Premium is the difference between the official rates of the FX rate you get in other segments of the FX market. The other segments will mean, the parallel market, the BDCs, of course in those days we used to talk about export proceeds, and all manner of different arrangements.

But today, the idea simply is that any other market outside of CBN is an alternative. So what is the rate there? How is it as compared to the official rate? So, the difference between these rates is called premium.

Adedipe said,  “Anytime that premium is greater than five per cent, it then becomes an incentive for round tripping. This means that the foreign currency becomes now attractive for those who want to speculate to go and buy, sell and then, they generate more Naira. So they can return to the official market and buy even more dollars, then go back and convert the dollar and get even more naira. That’s why it’s called round tripping. There is no currency anywhere in the world that can survive such an arrangement.”

More forex supply not solution

Adedipe also said that the question that needs to be answered is what drives the exchange value of the Naira. If you are able to answer that question, it will bring us to the understanding of what is happening today.

But ordinarily, in the interplay of demand and supply, what CBN has done is not to reduce the supply of FX to the market. What they have done is to shift the supply from one segment of the market to another, and even doubled the volume; which means, the response of rate is not to the supply coming to the market, which in fact has doubled.

Equally, what could have been the concern is access. The CBN has also dealt with that by not only telling the participatory banks to have desks designated for forex, where members of the public in need of foreign currencies for defined purposes can have access to the foreign currencies required, which you can now also give to them either in cash, or as a credit into their domiciliary account, or into their dollar card.

This means the issue is not supply on one hand, and on the other hand also, access is not the problem. It means the real issue is that the speculators knew that this position of the CBN is not something sustainable, which means that it’s not institutionalised.

This means therefore that if another Governor comes into office, after the expiration of Emefiele’s term, there is a likelihood that he or she may go back to the old way of doing things. So we have to come back to look at those factors that cause exchange rates to move. There are about 12 of them in economics.

“One of them is the interplay between demand and supply, which as of today does not support what we see happening in that market. That is the depreciation of the Naira in the market as we see now is not supported by the interplay between demand and supply.”

“Which is why I say, ultimately, the only reason we can admit this is speculation, which is based on the fact that, oh, CBN will not be able to sustain this? So, the question now will be, why can’t they sustain it? If we look at our external reserves, there are two ways to interpret that in this connection.”

Diaspora Remittances and BDCs

The BDCs have for years supported Nigeria’s growth agenda and CBN’s commitment to exchange rate stability. To continue to play these roles creditably, the BDC industry needs  improved access to forex.

The ABCON believes the success of BDCs goes beyond favourable rates but access to multiple streams of forex earnings to deepen the market, keep the naira stable and boost BDCs operations.

Making BDCs one of  the channels through which over $34 billion annual Diaspora remittances enter the economy will give depth to forex market and boost BDCs operations.

Diaspora remittances to Nigeria, now at $23 billion annually remain a reliable source of forex to the domestic economy and that is why over 5,500 CBN -Licenced BDCs should come to mind.

Concerned with the stagnant state of the nation’s economy marred with inconsistent forex earnings through oil export, the ABCON agreed with Adedipe for BDCs to be one of the channels for receiving Diaspora remittances into the economy.

Gwadabe 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.

“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,” Gwadabe said.

 Connecting BDCs to Remittance Business

Financial pundits have continued to give reasons why BDCs should be brought into the Diaspora remittance business. For instance, financial institutions’ long procedures, complicated forms, and history of poor service quality means BDCs are needed to deepen the market. The BDCs segment of the market operates in a simple manner while remaining closer to the people needing the remittance funds.

“BDCs buy foreign currency from remittance recipients and sell it to Nigerians who want to travel abroad. The reason for establishing these institutions in 1989 was to broaden the forex market and improve accessibility to hard currency. The CBN supervises and issues operational guidelines for BDCs. In March 2006, Nigeria had 293 licensed BDCs which have risen to over 5,500 operators today. This development means that BDCs are willing and ready to do the remittance business,” Gwadabe said.

For him,  remittances are on track to become the largest source of external financing in developing countries and Nigeria cannot be left behind.


Tinubu calls for good governance at 64th ECOWAS Session



President Bola Tinubu has called on ECOWAS leaders to prioritise good governance for the citizens in the quest for socio-economic transformation and development of the region.

At the 64th Ordinary Session of the Authority of Heads of State and Government of the Economic Community of West African States (ECOWAS), Tinubu emphasised that good governance would guarantee improved quality of life and stable environment.

‘’Let me also underscore the need for us, as leaders, to prioritise good governance for our people, as it serves as a catalyst for socio-economic transformation and development.

‘’The delivery of good governance is not just a fundamental commitment; it is also an avenue to address the concerns of our citizen, such as improved quality of life and a stable environment conducive to the achievement of sustainable development.

‘’By providing good governance that tackles the challenges of poverty, inequality and other concerns of the people, we would have succeeded in addressing some of the root causes of military intervention in civilian processes in our region.

‘’Our gathering here today is, therefore, a clear demonstration of our resolute commitment to the development and effective integration of our sub-region.

‘’As a people, we aspire to create a borderless, peaceful, prosperous and cohesive region, built on good governance and the rule of law, where people would have the opportunity to realise their full potentials for sustainable development,’’ he said.

On the issue of democratic abortion in some member countries, the President underscored the need for sustained efforts to ensure the return of peaceful transition of power based on the people’s choice.

‘’Allow me to emphasise that, to further strengthen our regional democratic achievements and uphold the right of our people to elect the leaders of their choice, the region agreed upon specific punitive measures to be taken against any Member State opting for unconstitutional change of government.

‘’While the imposition of punitive sanctions may pose challenges, it is important to underscore that the struggle to protect the fundamental liberties of our Community Citizens must be upheld and respected.

‘’To this end, I would like to reiterate the imperative of re-engaging with the countries under military rule on the basis of realistic and short transition plans that can deliver democracy and good governance.

“On our part, we should be prepared to provide them with technical and material support, to ensure the achievement of these strategic goals.’’

Tinubu said that the countries involved in alliance against democratic tenets would not be allowed to distract the community of its resolve to follow laid down rules and regulations for dealing with such actions.

‘’It is important that we also review some development in our sub-region including the move by some of our members under Military rule to float an Alliance of Sahel States.

‘’This phantom, push back-alliance appears intended to divert attention from our mutual quest for democracy and good governance that will impact the life of our people.

‘’We refused to be detracted from pursuing the collective dreams, aspirations and the noble path of ECOWAS integration as laid out in our institutional and legal frameworks,’’ he said.

The News Agency of Nigeria (NAN) reports that the ECOWAS Heads of State and Government are in closed door meeting to further deliberate on issues affecting the region in the last one year and those arising recently.

The body is expected to receive special reports on the practical arrangement for the Launch of the ECO , report on Member States in Transition, report on States of Implementation of the ECOWAS  Trade Liberalisation Scheme (ETLS) as well as decide on the venue of the 65th ECOWAS Session.

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Naira notes: There’s sufficient stock for economic activities, CBN assures Nigerians



Amidst complaints by some Nigerians about scarcity of Naira notes, the Central Bank of Nigeria (CBN) says there is adequate supply of the currency.

The News Agency of Nigeria (NAN) reports that CBN gave  the assurance against the beck drop of complaints by some bank customers  on scarcity of Naira notes at the counters, Automated Teller Machines (ATMs) Points of Sale (PoS), and Bureaux de Change (BDCs).

Some officials of Deposit Money Banks (DMBs) also claimed that the DMBs were not getting adequate supply of cash from the CBN.

But, according to a statement issued by the Corporate Communications Department of the CBN, there is no shortage of Naira notes, as there is adequate supply of the currency in the economy.

The apex bank said that the seeming currency scarcity was occasioned by large volume withdrawals of cash from various CBN branches by DMBs.

It said that panic withdrawals by bank customers was also partly responsible for the seeming scarcity.

“The attention of the CBN has been drawn to reports of alleged scarcity of
cash at banks, ATMs, PoS and BDCs in some major cities across the country.

“Our findings reveal that the seeming cash scarcity in some locations is due largely to high volume withdrawals from the CBN branches by DMBs and panic withdrawals by customers from the ATMs.

“While we note the concerns of Nigerians on the availability of cash for financial transactions, we wish to assure the public that there is sufficient stock of currency notes for economic activities in the country.

“The branches of the CBN across the country are also working to ensure the seamless circulation of cash in their respective states of operation,” it said.

The CBN advised members of the public to guard against panic withdrawals as there was sufficient stock to facilitate economic activities.

It also advised Nigerians to embrace alternative modes of payment, which would reduce pressure on using physical cash.

Meanwhile, the CBN also warned Nigerians to beware of fake Naira banknotes in circulation.

Its Acting Director, Corporate Communications, Mrs Hakama Sidi-Ali, gave the warning in a  statement.

Sidi-Ali said that the counterfeit Naira notes were mainly used for transactions in food markets and other commercial centres across major cities in the country.

She said that any person found complicit in the circulation of the counterfeit currency notes would face severe sanctions.

The director said that the law provided punishment by a term of imprisonment of not less than five years, for any person found culpable of counterfeiting Naira notes or any other legal tender in Nigeria.

“The attention of the CBN) has been drawn to the circulation of counterfeit banknotes, especially higher denominations by some individuals.

“The CBN is in constant collaboration with relevant security and financial agencies to confiscate fake Naira banknotes, arrest and prosecute counterfeiters.

“Members of the public are also encouraged to report anyone suspected of having counterfeit naira notes to the nearest police station, branch of the CBN, or via,” she said.

She enjoined all DMBs, Financial Houses and Bureaux de Change and the general public to be more vigilant.

Sidi-Ali urged them to take all necessary precautionary measures to curtail the acceptance and distribution of counterfeit notes.

“Furthermore, the general public is encouraged to embrace alternative modes of payment for day-to-day transactions to mitigate the risk of spreading counterfeit banknotes,” she said.

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NOA lauds Dangote’s oil production in Lagos



The National Agency (NOA) has commended Dangote Refining Company and the Federal Government for restarting local production of petroleum products in the country.

Its Director General, Malam Lanre Issa-Onilu, in a letter of congratulations to the Ministry of Petroleum Resources, celebrated the delivery of the first cargo of 950,000 barrels of crude oil to the Dangote Refining Company.

“The supply from Nigerian National Petroleum Corporation Limited (NNPCL) is a major breakthrough for the country after many years of importation with attendant supply hicups, corruption and detrimental impact of high foreign exchange demand on the economy.

“The NNPCL and Dangote Refining Company said the breakthrough is a cheering news that underscores the resolve of government and Nigeria’s progress towards economic stability and prosperity.

“For him, the Dangote Refining company, the biggest in Africa, will become a major player in the petroleum production and supply chain in Africa and help to tackle the many problems affecting the sector, including unstable product pricing in the country.”

According to the director-general, this is the beginning of the onward march to self-reliance and development because more refineries will soon come up. We hope that our other refineries will return to business”.

Outlining the benefits of local production of petroleum products in Nigeria, the NOA DG said “This means jobs for our people in that sector, reduction of foreign dependency for supply in NIgeria and huge savings in forex.

“The economic growth outlook will be better with stability of local energy supply.”d

According to the director-general, NOA’s new vision seeks to promote national positives to encourage citizens to renew their hope in the country and reflect the true narrative of our nation’s progress and challenges.

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