Over the years, foreign exchange earnings from Diaspora remittances have contributed to the growth of the Nigeria’s economy. But the World Bank has projected global remittances to decline by about 20% in 2020 due to the economic crisis induced by the COVID-19 pandemic. This, operators say means that Nigeria needs to broaden avenues through which migrant remittances flow into the economy. In this analysis, COMFORT EKELEME ;ASST BUSINESS EDITOR maintains that including Bureaux De Change (BDCs) in the payment channels will be a big win for the economy.
In Nigeria, nobody saw the COVID-19 pandemic crumbling the nation’s economy. At the beginning of the 2020 financial year, Nigerians had expected the federal government to take the necessary measures to ensure the virus does not hit the country, having seen the impact on other countries of the world, but its impact was underestimated.
For Nigeria, the impact has been devastating, especially in the inflow of oil revenue and Diaspora remittances into the economy. The World Bank even estimates that Diaspora remittances into global economies will drop by 20 per cent this year and Nigeria, which earned $25 billion in 2019 from the remittances market needs to open up more channels to boost collections.
Operators maintained that the 2019 earnings for Nigeria was a clear indication that migrant remittances is the backbone of the country’s foreign exchange inflows and should be protected.
Importance of migrant remittances to the economy to include serving as a lifeline for the recipients small house hold in the economy and used for health, nutrition, education and societal needs.
However, protecting the remittances market will require policy shift including breaking the current monopoly that limits funds receipts to only ‘few lucky’ players at the detriment of the economy.
According to World Bank Group President, David Malpass, remittances are a vital source of income for developing countries. The ongoing economic recession caused by COVID-19 is taking a severe toll on the ability to send money home and makes it all the more vital that we shorten the time to recovery for advanced economies. He explained that remittances help families afford food, healthcare, and basic needs.
Also in 2021, the World Bank estimates that remittances to low and middle-income countries will recover and rise by 5.6 per cent to $470 billion. The global average cost of sending $200 remains high at 6.8 per cent in the first quarter of 2020, only slightly below the previous year. Sub-Saharan Africa continued to have the highest average cost, at about nine percent, yet intra-regional migrants in Sub-Saharan Africa comprise over two-thirds of all international migration from the region.
President, Association of Bureaux De Change Operators of Nigeria (ABCON) Alhaji Aminu Gwadabe insists that now is the time to break the current industry monopoly that puts the remittances market in the hands of few players depriving others from tapping into the goldmine.
For him, there is urgent need to get more players join the remittance collection market including getting BDC operators approved for the business, adding that making BDCs one of the channels through which Diaspora remittances enter the economy will give depth to forex market and boost their operations.
“Now is the time for government and financial sector regulators to promote contact less payment channels, leveraging on digitization in the receipt of migrant remittances. The first win will be getting BDCs included in the payment channels to break monopolies of the fewer players, use of Simple Virtual Know Your Customer rule for beneficiaries and implementing supportive regulations,” Gwadabe said.
He also called for the establishment of training institutes to enhance capacity and infrastructure in the industry and broadening players’ business scope with cash-back incentives for those that patronize BDCs while also implementing a less cumbersome and complex documentation requirements for end users.
Gwadabe said the entry of BDCs into the remittance market will reduce such high cost of receiving money and deepen the job market.
Besides, 90 per cent of the total World Bank estimate of about $18 billion is trading outside the official window while majority of the registered International Money Transfer Operators (IMTOs) patronize the informal market because of the higher margin and post funding settlements method of the unlicensed agents.
Speaking on the opportunities in Diaspora remittance, Gwadabe said there are over 1.24 million Nigerian Migrants abroad and 50 per cent of them lives within the African neighbour hood, and the figure is expected to rise in the coming years.
The migrants’ cumulative remittances figures into the Nigerian economy by the World Bank estimates indicated $22 billion in 2017, $23 billion in 2018 and $25 billion in 2019. However there is a huge differential between the Word Bank statistics and the local sources due to lack of data and operators indulgence in non reporting and non rendition practices to the official window.
The remittances are also higher than both Foreign Direct Investment (FDI) and foreign aids flow to the economy and still, are cheaper sources of funds.
Gwadabe noted that remittances can be used in infrastructural developments as seen in India and Lebanon while in the Dubai UAE, the remittances are stable sources of liquidity in the market. The remittances, he added, can also serve as excellent source of investments funds in the economy even as it represent 83 per cent of the federal government budget in 2018.
Gwadabe said that the BDCs remain at the centre of economic development and have the capacity to attract needed capital for the development of the Nigerian economy.
Findings have also shown that forex remittances from Nigerians in the Diaspora far exceeded the country’s earnings from crude oil export last year.
For instance, that the total oil earnings of the nation stood at $15 billion in 2018, while the total remittance from Nigerians in Diaspora amounted to $25 billion in 2018. Nigeria earned a total of N5.54 trillion ($15.4 billion) from oil revenue last year, according to figures released by the Central Bank of Nigeria (CBN).
Gwadabe said the CBN forex policy has brought stability to the BDC industry and helped operators to embrace automation which is the standard best practice globally and adding the BDCs to one of the channels through which the Diaspora remittance funds come into the country will be a good way to reduce the reliance of rate differentials to sustain operators’ businesses.
“Nigerian BDCs operators have also identified with the immense opportunities presented by Diaspora remittances and want to play greater role in attracting more foreign capital into the economy. Reason being that remittances are known to help poorer recipients meet basic needs, fund cash and non-cash investments, finance education, foster new businesses, service debt and essentially, drive economic growth,” Gwadabe said.
He said that Nigerian BDCs, like their counterparts in other emerging or developing economies, have what it takes to deepen the forex market through remittances and collections.
“When that happens, it will not be the first time that BDCs were given the opportunity to turn the remittances market around for good. In India, the BDCs generate over $30 billion from the Diaspora remittances. In United Arab Emirates, the entire banking needs of banks are met by the BDCs. The working of the Lebanon economy is highly dependent on the activities of BDCs in that country. Therefore, Nigeria can also achieve higher revenue through BDCs given the opportunities we seen in the remittances market,” he said.
The CBN has for years, implemented robust and friendly policies to deepen the players in the market and remains the first regulator in the world to ban exclusive contracts of the dominant players.
The CBN Management led by Godwin Emefiele remains proactive and is taking steps that promote more Diaspora remittances inflow into the economy.
Such move, he said, will address the dwindling outlook of the naira in the post COVID-19 era and help in achieving the vision of making the local currency sovereign in the west African Market.
Gwadabe said the CBN forex policy has brought stability to the BDC industry and helped operators to embrace automation which is the standard best practice globally and adding the BDCs to one of the channels through which the Diaspora remittance funds come into the country will be a good way to reduce the reliance of rate differentials to sustain operators’ businesses.
He said that ABCON and its over 5,000 members nationwide are behind and in support of the various CBN measures to deepen and Revoulutionalize the supply of foriengn currency to the retail critical end user needs in the market.
Gwadabe said the BDCs will continue to support Nigeria’s growth agenda and CBN’s commitment to exchange rate stability. To continue to play these roles creditably, the BDC industry needs improved access to foreign exchange.
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