• Main News
  • About Us
  • Contact
Premium Times Opinion
Sunday, May 22, 2022
  • Home
  • Democracy and Governance
    • Bámidélé Upfront
    • Jibrin Ibrahim
    • Okey Ndibe
  • Economy
    • Ifeanyi Uddin
  • Issues of the Day
    • Adeolu Ademoyo
    • Aribisala on Tuesday
    • Dele Agekameh
    • Pius Adesanmi
  • Politics
    • Ebeneezer Obadare
    • Femi Fani-Kayode
    • Garba Shehu
    • Hannatu Musawa
    • Zainab Suleiman Okino
  • Guest Columns
  • Faith
    • Article of Faith
    • Sunday Ogidigbo
    • Friday Sermon
    • Elevated Sight
  • Home
  • Democracy and Governance
    • Bámidélé Upfront
    • Jibrin Ibrahim
    • Okey Ndibe
  • Economy
    • Ifeanyi Uddin
  • Issues of the Day
    • Adeolu Ademoyo
    • Aribisala on Tuesday
    • Dele Agekameh
    • Pius Adesanmi
  • Politics
    • Ebeneezer Obadare
    • Femi Fani-Kayode
    • Garba Shehu
    • Hannatu Musawa
    • Zainab Suleiman Okino
  • Guest Columns
  • Faith
    • Article of Faith
    • Sunday Ogidigbo
    • Friday Sermon
    • Elevated Sight
No Result
View All Result
Premium Times Opinion
Home Columns

Personal Remittances, the Market, and Toads, By Uddin Ifeanyi

by Premium Times
December 7, 2020
4 min read
0

…like the indicators on a car’s dashboard, these price signals speak to deeper underlying problems. To ďate, the concern of public policy has been too focused on freezing adverse price signals in the liquid nitrogen of rules and bureaucracy. But as this policy reversal one again points out, the emperor has no new clothes on. Men of goodwill have simply turned toads.


The Central Bank of Nigeria (CBN) advertises its most recent intervention in the domestic foreign exchange space as “necessary to deepen the foreign exchange market, provide more liquidity and create more transparency in the administration of diaspora remittances into Nigeria”. According to its recent amendments to the procedure for receiving diaspora remittances in the country, by permitting recipients of such remittances to cash out in foreign currencies, it is also helping “finance a future stream of investment opportunities for Nigerians in the diaspora, while also guaranteeing that recipients of remittances would receive a market-reflective exchange rate for their inflows”.

And in truth, by removing obstacles to transactions in the inward remittances market, the CBN might yet achieve these goals. When, a few years ago, the International Monetary Fund (IMF) first estimated the annual size of remittance inflow into the economy at about US$20 billion, most bank treasurers who I spoke to were sceptical. Extrapolating from the observed flow through international money transfer operators, nearly all guesstimated this at a wee bit more than US$2 billion annually. Most did concede, though, that the flow through informal channels were likely to be larger.

The market’s preference for hawala-type money transfers partially reflects the cumbrous nature of the formal financial services system. The innumerable forms that have to be filled and procedures often feel designed more to check the boxes in banks’ anti-money laundering/combating the financing of terrorism procedures than to ease customer access to their funds or improve the convenience of use of banks’ facilities. For the greater part, though, the naira’s fickleness, and banks’ inability to payout these remittances at anything but the official exchange rate drives the flow of remittances underground ― where the greenback fetches better rates.

It would take a while before banks’ domiciliary account balances grow in response to this new initiative. In the near-term, recipients will cash the dollars across bank counters, and head to the parallel market to convert these into naira. Not surprisingly, the announcement effect of the policy was enough to lop N20 off the naira’s dollar exchange rate.


By allowing recipients of remittance inflows to withdraw dollars ― even though they need to spend naira ― the CBN guarantees two things. First, more transparency in the workings of the inward remittances market. This is where it hopes that its new policy will “boost remittance inflows and foster an environment that would enable faster, cheaper, and more convenient flow of remittances back to Nigeria” ― according to the governor of the Central Bank. Second, improved supply of foreign exchange to the parallel market. It would take a while before banks’ domiciliary account balances grow in response to this new initiative. In the near-term, recipients will cash the dollars across bank counters, and head to the parallel market to convert these into naira. Not surprisingly, the announcement effect of the policy was enough to lop N20 off the naira’s dollar exchange rate.

“How effective will this policy be?” is a different question. The CBN estimates the inflow of remittances at US$24 billion yearly. This, however, was pre-COVID-19. With the dirty, dangerous and demeaning work which most immigrants used to do in the old normal being first in line for the sundry disruptions that have come in the wake of the pandemic, it is a fair bet that the liquidity that the CBN expects from this policy pivot will be muted. Then again, on the supposition that the economy was already receiving circa US$20 billion annually from its diaspora, this new policy creates no new sources of inflows. It simply routes the supply chain back into the formal financial services sector. It may, by forcing international money transfer operators to remit the dollars on these transactions into the country, boost supply marginally. But remember that a decision to ban payouts in foreign currency created the incentive for the non-repatriation of such funds in the first place.

…the biggest achievement of this policy is the CBN’s embrace of the market in search of a solution to its dwindling reserve problem. It proves how, properly-designed, policies may guarantee outcomes that are not positive for the economy. Dig deeper, and it also speaks to how poorly-thought out policies have continued to hurt the economy.


Still, the biggest achievement of this policy is the CBN’s embrace of the market in search of a solution to its dwindling reserve problem. It proves how, properly-designed, policies may guarantee outcomes that are not positive for the economy. Dig deeper, and it also speaks to how poorly-thought out policies have continued to hurt the economy. We have been down this road before. When the apex bank, in need of all the dollars it can get, opened this window for remittances, no sooner, though, than a recovery in oil prices had given the economy some head room, than the CBN shut the window down. Thus, we cannot do much harm by reminding ourselves that some six years ago, this “new initiative” was “standard procedure”.

Why was it reversed? And why walk back that earlier reversal now? Understandably, domestic economic indices – sovereign finances/debts, the naira’s exchange rate, headline inflation, the unemployment rate, etc. – have worsened on the back of such policy somersaults. We may not like the market. Its price swings do hurt the economy, especially the large numbers of Nigerians who are barely getting by. But like the indicators on a car’s dashboard, these price signals speak to deeper underlying problems. To ďate, the concern of public policy has been too focused on freezing adverse price signals in the liquid nitrogen of rules and bureaucracy. But as this policy reversal one again points out, the emperor has no new clothes on. Men of goodwill have simply turned toads.

Uddin Ifeanyi, journalist manqué and retired civil servant, can be reached @IfeanyiUddin.

Share this:

  • Tweet
  • Print
  • More
  • Pocket
  • Share on Tumblr

Related

Previous Post

Bring In the Mercenaries!, By Wole Olaoye 

Next Post

Nigerian Citizens and the State of the Federation, By Ebere Onwudiwe

Related Posts

Trust and Confidence Building As Conditions of Good Governance, By Uddin Ifeanyi
Columns

The Policy Implications of 2021’s Low Growth Projections, By Uddin Ifeanyi

February 1, 2021
Akinwunmi Adesina: Africa’s Spotless Son, By Wole Olaoye
Columns

Iron Woman of Berlin, By Wole Olaoye

January 31, 2021
Rethinking Heroism and the Nigerian Civil Service, By Festus Adedayo
Columns

Aliko Dangote’s Costly Mess of the Libido, By Festus Adedayo

January 31, 2021
Why Lai Mohammed Must Be Fired Immediately, By Femi Aribisala
Article of Faith

Is God Invisible?, By Femi Aribisala

January 31, 2021
Religion As Africa’s Trojan Horse, By Osmund Agbo
Columns

South-East Governors: Preparing For a Post-oil and Restructured Nigeria, By Osmund Agbo

January 30, 2021
People Deserve The Coach They Hire, By Owei Lakemfa
Columns

Again, Entombed Humans Triumph Over Death, By Owei Lakemfa

January 30, 2021
Next Post
Nigeria: Facing Down Our Demons, By Ebere Onwudiwe

Nigerian Citizens and the State of the Federation, By Ebere Onwudiwe

#EndSARS and the Rise of A New Nigeria, By Dakuku Peterside

Africa and the COVID-19 Vaccine, By Dakuku Peterside

Editorial

  • EDITORIAL: The Urgency of Tackling Nigeria’s Second Wave of COVID-19

    EDITORIAL: The Urgency of Tackling Nigeria’s Second Wave of COVID-19

  • EDITORIAL: Unearthing the Cogent Lessons In the NESG-CBN Economic Policy Imbroglio

    EDITORIAL: Unearthing the Cogent Lessons In the NESG-CBN Economic Policy Imbroglio

  • EDITORIAL: COVID-19: Calling On Nigeria’s Billionaires and Religious Leaders To Step Up

    EDITORIAL: COVID-19: Calling On Nigeria’s Billionaires and Religious Leaders To Step Up

  • EDITORIAL: Bichi Must Go; Buhari Must Halt Slide Into Despotism

    EDITORIAL: Bichi Must Go; Buhari Must Halt Slide Into Despotism

  • EDITORIAL: The Flaws In Governor Emefiele’s Five-Year Plan For Central Bank of Nigeria

    EDITORIAL: The Flaws In Governor Emefiele’s Five-Year Plan For Central Bank of Nigeria

Subscribe to our Opinion articles via email

Enter your email address to get notifications of new opinion articles as they are published.

Join 526,538 other subscribers

Most Popular

  • The Bad Consequences and Dangers of Adultery and Fornication (Zina) In Islam, By Murtadha Gusau
    The Bad Consequences and Dangers of Adultery and Fornication (Zina) In Islam, By Murtadha Gusau
  • World Teachers Day and The Position of Teachers In Islam, By Murtadha Gusau
    World Teachers Day and The Position of Teachers In Islam, By Murtadha Gusau
  • Islam and the Conditions For Marrying More Than One Wife, By Murtadha Gusau
    Islam and the Conditions For Marrying More Than One Wife, By Murtadha Gusau
  • The Qualities of a Good Leader In Islam, By Murtadha Gusau
    The Qualities of a Good Leader In Islam, By Murtadha Gusau
  • Olabisi Ajala, the Traveller: Of Fame and Penury, By Femi Kehinde
    Olabisi Ajala, the Traveller: Of Fame and Penury, By Femi Kehinde
  • You Will Be Held Responsible On What Happened To Your Children!, By Murtadha Gusau
    You Will Be Held Responsible On What Happened To Your Children!, By Murtadha Gusau
  • Slaughtering Animal for the New Born Baby (Al-Aqiqah) In Islam, By Murtadha Gusau
    Slaughtering Animal for the New Born Baby (Al-Aqiqah) In Islam, By Murtadha Gusau

Like us on Facebook

Like us on Facebook

Podcasts

Advertisement

Advertisement

Advertisement

  • Main News
  • About Us
  • Contact

© 2022 JNews - Premium WordPress news & magazine theme by Jegtheme.

No Result
View All Result
  • Home
  • Democracy and Governance
    • Bámidélé Upfront
    • Jibrin Ibrahim
    • Okey Ndibe
  • Economy
    • Ifeanyi Uddin
  • Issues of the Day
    • Adeolu Ademoyo
    • Aribisala on Tuesday
    • Dele Agekameh
    • Pius Adesanmi
  • Politics
    • Ebeneezer Obadare
    • Femi Fani-Kayode
    • Garba Shehu
    • Hannatu Musawa
    • Zainab Suleiman Okino
  • Guest Columns
  • Faith
    • Article of Faith
    • Sunday Ogidigbo
    • Friday Sermon
    • Elevated Sight

© 2022 JNews - Premium WordPress news & magazine theme by Jegtheme.

This website uses cookies. By continuing to use this website you are giving consent to cookies being used. Visit our Privacy and Cookie Policy.