Why diaspora remittances collapsed in Nigeria – RenCap

Diaspora remittance flows into Nigeria collapsed because of the wide gap between the country’s official exchange rate and the Bureau De Change rate, the Global Chief Economist at Renaissance Capital, Charlie Robertson, has said.

The Central Bank of Nigeria had on Saturday introduced a new scheme that will see recipients of diaspora remittances get N5 extra for every $1 received from abroad through licensed international money transfer operators, from Mar. 8 to May 8.

The CBN described what it called ‘Naira 4 Dollar Scheme’ as an incentive for senders and recipients of international money transfers.

Robertson, in an emailed note on Monday, said, “CBN [is] trying to compare this incentive to what has happened in Pakistan and Bangladesh (remittances boomed in 2020) – but the main reason remittances collapsed in Nigeria was because the official exchange rate was so far away from the BDC rate.

“For a few weeks/months now, you’ve been allowed to use the BDC rate, so remittances were likely to bounce anyway and this incentive might support that but is not the big story.”