The Central Bank of Nigeria (CBN) has announced a remarkable increase in remittance inflows, reaching a record $553 million in July 2024. This figure represents a 130% surge compared to the same period in 2023, marking the highest monthly inflows ever recorded in Nigeria’s history.
In a statement released on Tuesday, August 20, 2024, by Hakama Sidi Ali, the Acting Director of Corporate Communications for the CBN, the bank credited this significant achievement to a series of strategic policy measures aimed at boosting liquidity in the country’s foreign exchange market.
“This figure represents the highest monthly total inflows on record and reflects ongoing efforts by the CBN to enhance liquidity in Nigeria’s foreign exchange market,” the CBN stated. The bank’s efforts include granting licenses to new International Money Transfer Operators (IMTOs), implementing a willing buyer-willing seller model, and ensuring timely access to naira liquidity for these operators.
Remittances, which are funds sent back home by Nigerians living abroad, have long been a critical source of foreign exchange for the country. These inflows supplement foreign direct investment and portfolio investments, providing much-needed support to the economy. The CBN’s initiatives appear to be driving continued growth in this vital area.
One of the key policy changes that contributed to this surge was the removal of the cap on exchange rates quoted by IMTOs. Previously, these operators were required to quote rates within a narrow range of -2.5% to +2.5% around the previous day’s closing rate of the Nigerian Foreign Exchange Market.
The removal of this cap has allowed for greater flexibility and competitiveness in the market, encouraging more Nigerians in the diaspora to send money home through formal channels.
Furthermore, the CBN issued revised guidelines for IMTOs, significantly increasing the application fee for an IMTO license from N500,000 in 2014 to N10 million in 2024, a staggering 1,900% increase over ten years. The bank also set a minimum operating capital requirement of $1 million for foreign IMTOs, with a corresponding amount for local entities.
Another notable policy shift was the lifting of a previous ban that prevented IMTOs from purchasing foreign exchange from the domestic market to meet their obligations. This change, coupled with the establishment of a Collaborative Task Force between the CBN and IMTOs, has been instrumental in driving the surge in remittance inflows.
The task force, which reports directly to Yemi Cardoso, the Governor of the CBN, was set up with the specific goal of doubling remittance inflows into the country.
The surge in remittance inflows comes at a crucial time for Nigeria, as the country continues to grapple with economic challenges, including inflation and foreign exchange shortages. Remittances provide a critical source of foreign exchange, helping to stabilize the naira and support economic activities.
In its statement, the CBN also noted that the National Bureau of Statistics (NBS) reported a slowdown in Nigeria’s year-on-year headline inflation rate for the first time in 19 months. This, according to the CBN, signals the effectiveness of its monetary policy tightening measures, which have included raising interest rates to curb inflation.
The Central Bank’s reforms have not only focused on increasing remittance inflows but have also aimed at improving the overall functionality of Nigeria’s foreign exchange market. In recent months, the CBN has granted 14 new Approval-in-Principle (AIP) licenses to IMTOs, allowing more operators to enter the market.
As Nigeria continues to navigate its economic recovery, the role of remittances cannot be overstated. The funds sent home by Nigerians abroad not only support millions of families but also contribute to the country’s overall economic stability. The CBN’s efforts to boost these inflows are, therefore, crucial in helping to mitigate the impact of external shocks and maintain the country’s foreign exchange reserves.
