Nigeria’s multiple exchange rates blocking diaspora remittances – FDC

The existence of multiple exchange rates in Nigeria is one of the greatest constraints to diaspora remittance inflow into the country, the Financial Derivatives Company Limited has said.

“Diaspora remittance is a major source of foreign exchange that has proven to be resilient amidst domestic and global turbulences,” the Lagos-based firm, led by economic expert Bismarck Rewane, said in a new report. “For example, during the COVID-19 crisis, remittance flows defied expectations and proved to be resilient.”

It said diaspora remittance declined only by about 27 percent to $17.3 billion in 2020 from $23.8 billion in 2019, compared to capital importation, which declined by over 60 percent to $9.6 billion from $24 billion in the same period.

The FDC said the Central Bank of Nigeria had in recent times shown strong interest in improving the use of the formal channel for diaspora remittance.

It said to achieve this, the CBN implemented the Naira-4-Dollar policy, adding that the World Bank opined that the policy was instrumental to the improvement in remittance inflow recorded in 2021.

“But there is still much to be done to improve the inflow of diaspora remittance. One of the greatest constraints to remittance inflow is the existence of multiple exchange rates,” the FDC analysts said.

According to them, the widening gap between the parallel market and official rates, and persistent exchange rate volatility make it difficult to fairly determine the true value of remittance in local currency.

“Thus, to induce a greater inflow of remittance, it is imperative to maintain a stable and single exchange rate,” they added.

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