- Remittance inflows increased by 130 per cent year-on-year to an all-time high of $553 million
- The Central Bank attributed the increase, as well as the drop in inflation in July, to its efforts to bolster confidence in the foreign exchange market
- Some of these efforts include the removal of exchange rate caps quoted by IMTOs, granting IMTOs access to the official foreign exchange window, etc
The Central Bank of Nigeria (CBN) says its policies are instrumental to the increase in remittance inflows to an all-time high of $553 million in July and the slow-down of headline inflation to 33.40 per cent in July.
The amount, a 130 per cent increase from the amount recorded in the corresponding period in 2023, represents the highest monthly total inflows on record.
In a statement on Tuesday, August 20, the acting Director, Corporate Communications Department of the CBN, Hakama Sidi Ali, said the development represents ongoing efforts and policy measures introduced by the CBN to enhance liquidity in Nigeria’s foreign exchange (FX) market.
She said some of the measures include granting licenses to new International Money Transfer Operators (IMTO,), implementing a willing-buyer-willing-seller model and enabling timely access to naira liquidity for IMTOs.
Ali noted that recent data from the National Bureau of Statistics (NBS) revealed that Nigeria’s year-on-year headline inflation rate slowed in July 2024 for the first time in 19 months, an indication that the CBN’s monetary policy tightening measures are delivering results.
She said, “The Central Bank of Nigeria (CBN) has reported a significant increase in remittance inflows, reaching $553 million in July 2024, a 130 per cent increase from the corresponding period in 2023.
“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 substantial growth in remittance receipts is attributable to policy measures introduced by the CBN to enhance liquidity in Nigeria’s foreign exchange market. These measures include granting licences to new International Money Transfer Operators (IMTOs), implementing a willing-buyer-willing-seller model and enabling timely access to naira liquidity for IMTOs.
“Diaspora remittances are a crucial source of foreign exchange for Nigeria, supplementing both foreign direct investment and portfolio investments. The CBN’s initiatives have supported continued growth in these inflows, aligning with the institution’s objective of doubling formal remittances within a year.”
Remittance inflows have been on the increase
There have been sustained increases in remittance inflows. In May 2024, the figures increased by $172 million or 90 per cent from $193.31 million in April to $365.44 million, according to the CBN.
In January, remittances stood at $138.56 million, decreased by $99.42 million to $39.14 million in February and increased to $104.90 million in March. In April and May, $193.31 million and $365.44 million, respectively, were remitted to the country’s coffers from the Diaspora.
According to the data, remittances increased by 163 per cent between January and May 2024 due to reforms and policies to shore up foreign-currency inflows.
In the first quarter (Q1) of the year only, a total of $282.62 million was remitted into the country, which is an $18.96 million or 6.28 per cent decrease when compared to the $301.57 million recorded in Q1 2023.
At the last Monetary Policy Committee (MPC) meeting, CBN governor, Olayemi Cardoso, said the MPC is concerned with stemming inflation and FX stability, which explains its stringent monetary tightening stance.
He said the increase in remittance inflows was an off-shoot of the CBN’s policies, among other positive outcomes.
He said, “Two areas that pose a challenge are food inflation and foreign exchange. The MPC noticed the moves by the fiscal side taking certain policies that help to moderate food inflation and we are hopeful and encouraged.
“On the foreign exchange, we have seen positive outcomes from the tools that we have been using over the recent past. For example, the exchange rate has converged, limiting the opportunities for arbitrage.
“Inflows have increased from $37.93 billion between January and May 2024 to $38.8 billion. Net inflows grew by 73.4 per cent in May 2024 compared to May 2023. Diaspora remittances at the end of June had gone up to $2.34 billion in comparison to $1.58 billion for the corresponding period last year. Capital importation between January and June was $5.92 billion, relative to $1.77 billion for the corresponding period last year.”
Recall also that Cardoso has said the bank’s efforts are responsible for keeping inflation below 50 per cent month-on-month between February and May this year.
CBN’s policies to improve remittance inflows
Since his appointment in September 2023, CBN governor, Olayemi Cardoso, has rolled out many policies aimed at boosting FX liquidity and enhancing remittance inflows through formal channels.
To allow for flexible currency quoting and to address suspected cases of FX speculations and hoarding, the CBN, in January, removed the exchange rate caps quoted by IMTOs.
The policy required IMTOs to quote rates within an allowable limit of -2.5 per cent to +2.5 per cent around the previous day’s closing rate of the Nigerian FX market.
This was followed by revised operational guidelines that required IMTOs to have a minimum operational capital of $1 million for foreign companies and the naira equivalent for those operating within the country. The previous requirement was N50 million and N2 billion for foreign and Nigerian IMTPs, respectively. The guideline also stipulated an increase in licence application fees of IMTOs from N500,000 to N10 million. These were aimed at strengthening the sector’s operational and financial capacities
The CBN had also told banks and IMTOs to halt dollar payments of inbound transfers to customers in Nigeria.
In a revised guideline to IMTOs and banks on January 31, the CBN said all inbound money transfers to Nigeria will be paid only in naira through a bank account or in cash at the prevailing rate in the Nigerian FX market.
It added that transfers above the naira equivalent of $200 must be accredited to the recipient’s account number while Naira cash payment equivalent for amounts below $200 will require an acceptable means of identification such as an international passport, driver’s licence, national identity card and INEC Permanent Voters Card.
The guideline also prohibited banks and fintechs from operating IMTO services but can act as agents.
Not done yet, the CBN, in May, granted an approval-in-principle (AIP) to 14 IMTOs to improve foreign currency remittance through formal channels, a target which the CBN governor, Olayemi Cardoso, recently said is achievable within a year.
On June 24, the apex bank also granted IMTOs access to naira directly from the CBN window or through Authorised Dealer Banks (ADBs) to settle transactions for the sale of foreign exchange (FX) in the market.
It said the measure is part of its commitment to enhancing local currency liquidity, ensuring the smooth functioning of the FX markets, improving formal remittance channels and “widening access to local currency liquidity for the settlement of Diaspora remittances.”
After 19 months, Nigeria’s inflation drops by 0.79% to 33.40% in July
Meanwhile, TheRadar reported that Nigeria’s headline inflation rate, which measures the average change in the prices of goods and services over time, has dropped to 33.40 per cent in July 2024 from 34.19 per cent recorded in June 2024.
The 0.79 percentage month-on-month drop is the first decline in the headline inflation rate since December 2022, when it last dropped to 21.34 per cent.
