In November 2020, the Central Bank of Nigeria (CBN) declared that Nigerians could only receive remittance payments through the U.S. dollar. Three years later, it has lifted the ban and will now allow remittances to be paid in the naira, a move it hopes will boost remittances amid a 20% dip.
“The Central Bank of Nigeria hereby announces Naira as a payout option for receipts of proceeds of International Money Transfers,” part of a circular issued by the CBN last week stated.
The move now allows Nigerians a choice between receiving their funds in the U.S. dollar, the naira, or the eNaira, the country’s digital currency.
“For the avoidance of doubt, IMTOs are required to pay out the proceeds using the Investors’ & Exporters’ window rate as the anchor rate on the date of the transaction. The regulation takes effect immediately,” the circular added.
This window allows forex trades to be made at exchange rates based on prevailing market circumstances.
In its November 2020 decree, CBN also declared that only commercial banks could transfer funds onward to clients, squeezing out International Money Transfer Operators (IMTOs) from the lucrative sector. The latest decree has reversed the ban.
At the time, the President Muhammad Buhari government sought to “simplify and improve the receipt and administration of diaspora remittances.”
Speaking to a local outlet, the managing director of Lagos-based Cowry Asset Management Limited, Johnson Chukwu, noted that the move was also geared toward protecting Nigerians.
“The basic thing we have to know is that the reason why CBN initially disallowed naira payment for dollar remittances was because the beneficiaries were being shortchanged in the sense that the parallel market rate was materially above the official rate,” he said.
This kept many at bay from the official remittance channels as they would be subjected to the official rates, which were always far below the parallel market rate.
“With the harmonisation of the exchange rate, you should expect that all remittances will now go through the banking system because the shortfall they were suffering when they made remittances through the official window has now been addressed,” Chukwu added.
Nigerians shun the eNaira for remittances
The new directive comes amid a dip in remittances to Africa’s largest economy. According to a recent report by the CBN, half-year remittances have dipped by over 20%. Despite the dip, Nigeria is only bettered by Egypt in Africa for remittance inflows.
The new policy could play a big part in reversing the trend, believes Abike Dabiri-Erewa, the chairman of the Nigerians in Diaspora Commission (NIDCOM). In a statement, Abike said that giving remitters the option of open market rates will motivate them to send more money through official channels.
And while CBN has also opened remittances through the eNaira, the CBDC has yet to capture significant interest in the field. As a digital currency, the eNaira would be better suited to direct cross-border transfers than IMTOs or banks.
However, Nigerians have continued to shy away from the CBDC. Some have no trust in a digital currency offered by the CBN, whose reputation under the previous administration has taken a crushing blow. Others say their options, including cash for small payments and bank transfers for larger payments, are sufficient.
Despite their apathy for the eNaira, Nigerians have continued to adopt digital currencies in their masses. A recent study found that the West African country leads the world in digital asset awareness at 99%. Nigeria also ranked in the top ten for Bitcoin adoption in another report last month.
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