CBN Naira for Dollar Scheme for Diaspora Remittances

On 5^th March 2021, the Central Bank of Nigeria (“CBN”) released a circular introducing an incentive of N5 for senders and recipients of international money transfers. The circular titled ‘Introduction of the CBN’s “Naira 4 Dollar Scheme” for Diaspora Remittance’ (the “Circular”), is aimed at encouraging the inflow of Dollars from Nigerians in the Diaspora.

According to the CBN, the incentive is restricted to Dollar inflow. Thus, senders and recipients of other foreign currencies are unable to benefit from the scheme. The scheme aims to boost the inflow of Dollars into the economy and incentivize the process of international remittance through official channels. With the introduction of this scheme, we expect that more Nigerians in diaspora to remit more dollars to Nigeria. Additionally, the scheme seeks to improve Nigeria’s external reserves, consequently hedging against the further decline of the Nigerian Naira against the Dollar.

Whilst it is yet unclear how the market will react to this development, the introduction of the scheme is not peculiar to Nigeria as other emerging economies have at some point adopted similar measures. In Pakistan, the government bears the cost of remittance above $200 by a Pakistani expatriate. Similarly, the government of Bangladesh gives a 2% rebate on monies sent by expatriates to Bangladesh. With respect to Nigeria it is uncertain whether the N5 incentive will provide sufficient incentives for Nigerians in diaspora to make remittance through CBN licensed international money transfer operators (“IMTOs”). It is common for senders and recipients of foreign exchange to opt for the parallel market rather than authorized dealers, but with the recent move by the CBN, we hope to see a significant upsurge in inflow through CBN licenses IMTOs.

The scheme commences from 8^th March 2021 to 8^th May 2021. While the Circular is silent as to whether the scheme will be extended, we implore Nigerians to take advantage of the Scheme.

To see the full Circular, kindly click here.