The Central Bank of Nigeria (CBN) has introduced a rebate of N5 for every $1 of fund remitted to Nigeria through licensed International Money Transfer Organizations (IMTOs).
This rebate will be paid into the bank accounts of beneficiaries, following receipt of remittance inflows.
CBN governor Godwin Emefiele made this disclosure on Saturday at a virtual event.
Emefiele said “this new measure will help to make the process of sending remittance through formal bank channels cheaper and more convenient for Nigerians in the diaspora.”
This new policy is expected to take effect on the 8th of March 2021.
According to the CBN, “the average cost of sending $200 worth remittances to Nigeria from the US is roughly 4.7 percent. Studies have shown that even a 1 percent decrease in the cost of sending remittance can result in a significant boost in inflows.”
Countries in South Asia such as Pakistan and Bangladesh are aware of this impact and they introduced reimbursement schemes to support inflows.
In Pakistan, the scheme which is known as ‘free send’ has enabled a record amount of inflows of over $2billion a month even during the COVID pandemic.
Bangladesh introduced its own scheme in June 2019, with a 2 percent rebate on remittance inflows. Following this action, they have also seen a 20 percent boost in remittance inflows.
Emefiele during his presentation stated that “our policy on the administration of remittance flows is aimed at increasing the transparency of remittance inflows, reducing rent-seeking activities, and providing Nigerians in the diaspora with cheaper and more convenient ways of sending remittances to Nigeria.”
In addition, the CBN he said believes that “this new policy measure will encourage banks and financial institutions to develop products and investments vehicles, geared towards attracting investments from Nigerians in the diaspora.”
These changes he said can help to finance a future stream of investment opportunities for Nigerians living abroad.
Efforts to drive remittance inflows into Nigeria Emefiele explained “would yield positive results as we strive to ensure formal banking channels offer cheaper, faster and more convenient ways for remitters to send funds to beneficiaries”.
“Reducing the cost of sending remittances is a significant way to boost remittance inflows to Nigeria. The new policy is expected to enlarge the scope and scale of foreign exchange inflows into the country with a view to stabilizing the exchange rate and supporting accretion to external reserves,” Emefiele said.
More importantly, it will provide an opportunity for Nigerians living abroad to make investments in their home country.
On the topic of round-tripping, there is a maximum amount that you can remit through an IMTO. You can’t send $100,000 through an IMTO. The CBN’s action while it does not go far enough in offering total reimbursements is a step in the right direction in reducing the cost burden for Nigerians remitting funds to Nigeria.
Addressing the issue of round-tripping, Emefiele noted that “report of remittance inflows are grossly characterized and marred by irregularities as some money transfer operators unlawfully choose to under-report the inflows.
“Their mode of operation is to report less amount than what they received and thereafter pursue arbitrage premium by selling the unreported excess in other markets at different rates.
“This is our definition of round-tripping, which is wholly illegal in Nigeria. Accordingly, and in view of the need to correct the observed irregularities, the CBN took decisive policy actions,” Emefiele said.