Boost Nigeria’s GDP with $ 34 Billion Untapped Remittances
Annual remittances from Nigerians in the diaspora are estimated at $ 34 billion and much of it never reaches the country. Financial analysts urged the Central Bank of Nigeria (CBN) to institute a framework to receive these funds into the economy to increase dollar reserves and save the naira.
There are $ 34 billion in annual transfers estimated by Nigerians in the diaspora who are barely touched due to the lack of channels to attract funds into the economy.
Globally, Nigeria is one of the few countries that concisely attracts migrant worker funds. The others are Pakistan, Canada, the United States, Australia and Vietnam.
Nigeria is on the side of those who have large numbers of migrant workers in the rest of the world, and therefore earn foreign currency which they wish to send home. But there is a huge problem that limits the funds to return home.
In a media report, renowned economist and chief consultant at B. Adedipe Associates Limited, Dr Biodun Adedipe, explained that if Nigeria is able to effectively manage these remittances, it will add 0.4% to the growth in our GDP every year.
He revealed that much of the dollars from remittances do not enter the forex market in Nigeria. The recipient gets the naira equivalent of the fund even when the funds never arrived in Nigeria, thus depriving Nigeria of the full benefit of diaspora remittances, despite the country leading the way in terms of benefiting migrant workers. .
“So what happens then is that instead of bringing it into the forex market in Nigeria, they keep it outside. It also becomes a leg that supports the speculations we talked about earlier. I believe that was part of the reason CBN introduced the $ 1 incentive for N5. The idea now is to see if the country can make the most of the remittances.
“This is now a policy that I think we need to question further. How can we make the foreign exchange generated by Nigerian migrant workers more attractive to be sent home and become part of our national supply in our market here? It’s now a space for BDCs, ” Adedipe said.
Analysts said what is needed is the implementation of laws stating that oil companies and other multinational corporations bring dollars into the economy instead of keeping them in their home countries. They said this would ensure that what is kept out of the market comes to Nigeria to boost supply. CBN already has the tools, but they need to apply them.
ABCON President Alhaji (Dr) Aminu Gwadabe said that globally, BDCs remain one of the channels through which diaspora remittances enter countries. He said the BDCs remain at the center of economic development and have the capacity to attract the capital necessary for the development of the Nigerian economy and the deepening of the foreign exchange market.
The results also showed that Nigerians in the diaspora’s foreign exchange remittances far exceeded the country’s income from crude oil exports last year. Since many transactions go unrecorded or take place through informal channels, the actual amount of remittances in the country is arguably higher. The estimate is that migrant remittances to Nigeria could reach $ 25.5 billion, $ 29.8 billion and $ 34.8 billion in 2019, 2021 and 2023 respectively.
Gwadabe said that diaspora remittances remain a cheap source of remittances, as they do not have to be repaid with interest but go directly into building houses, paying school fees, medical care and a lot. things that add value to a weak economy.
“BDCs buy foreign currencies from the recipients of remittances and sell them to Nigerians who wish to travel abroad. The reason for the creation of these institutions in 1989 was to expand the foreign exchange market and improve accessibility to hard currencies. The CBN oversees and issues operational guidelines for BDCs. As of March 2006, Nigeria had 293 licensed BDCs, which today have more than 5,500 operators. This development means that BDCs are willing and ready to trade in remittances, ”Gwadabe said.
BDCs have for years supported Nigeria’s growth agenda and CBN’s commitment to exchange rate stability. To continue to play these roles honorably, the BDC industry needs better access to forex.
ABCON believes that the success of BDCs goes beyond favorable rates, but has access to multiple foreign exchange income streams to deepen the market, maintain the stability of the naira, and stimulate BDC operations.
Making BDCs one of the channels through which more than $ 34 billion in annual diaspora remittances enter the economy will deepen the foreign exchange market and boost BDC operations.
Diaspora remittances to Nigeria, which now stand at $ 23 billion per year, remain a reliable source of foreign exchange for the national economy and that is why more than 5,500 licensed CBN – BDCs are expected to come in. the mind.
Concerned about the stagnant state of the national economy marred by inconsistent foreign exchange income from oil exports, ABCON agreed with Adedipe that BDCs be one of the channels for receiving remittances from the diaspora. in the economy.
Gwadabe explained that diaspora remittances represent household income in foreign economies primarily from the temporary or permanent movement of people to those economies. Remittances in cash and cash that pass through formal channels such as wire transfers, or through informal channels, such as cash or goods transported across borders, adding that Nigeria can cover a large part of the capital flow shortfalls through remittances from its diaspora citizens using BDCs.
“Nigerian BDC operators have also identified with the immense opportunities presented by diaspora remittances and wish to play a greater role in attracting more foreign capital into the economy. The reason is that remittances are known to help the poorest recipients meet basic needs, finance cash and non-cash investments, finance education, foster new businesses, pay back debt and, essentially, to stimulate economic growth, ”Gwadabe said.
Financial analysts have continued to provide reasons why BDCs should be drawn into the diaspora remittances sector. For example, lengthy procedures at financial institutions, complicated forms, and a history of poor service quality mean BDCs are needed to deepen the market. The BDC segment of the market operates in a straightforward manner while remaining closer to the people in need of transfer funds.
For Gwadabe, remittances are fast becoming the biggest source of external finance in developing countries and Nigeria cannot be left behind.