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At a time when the Central Bank of Nigerian (CBN) is in desperate need of uninterrupted and growing inflow of foreign exchange in order to shore up the Nigerian foreign reserve, it is sad to note that the apex bank is implementing a policy that is directly undermining its. On November 30, 2020, the CBN Governor, Godwin Emefiele, spoke to journalists at a press conference in Abuja where he announced that with effect from December 4, 2020, the beneficiaries of remittances to Nigerian from abroad will now have an unhindered access to Diaspora remittances.
This means that foreign exchange inflow through Diaspora remittances can now be accessed by the beneficiaries and this makes it possible for them to sell to whoever they desire at a price that is acceptable to them. This policy will therefore allow for unfettered access to foreign exchange from the Diaspora and other money transfer remittances. This is believed to support improved foreign exchange inflows into the country through official channels. This policy has been lauded by many experts in the country because it is believed that if the foreign exchange market is flooded with foreign currency inflow from Nigerians in Diaspora, it will consequently lead to the appreciation of Naira and the likelihood of convergence of the exchange rates.
The CBN Governor said that the current yearly Diaspora remittances into the country is about $24 billion and this policy could help in improving the balance of payment position, reduce dependence on external borrowing and mitigate the impact of COVID-19 on forex inflows into the country. On the other hand, the CBN policy on non-oil export proceeds has the potential to significantly reduce the already low (which is less than $5 billion and just about 10-15% of total export) non-oil export proceeds in the country. At a time when the CBN should be doing everything possible to encourage non-oil export, it seems it is trying to shore up the foreign reserve on one hand and at the same time destroying its plan to increase foreign exchange inflow on the other hand.
It is very important for the CBN to know that it is sending a wrong signal to the exporting community that the federal government is not concerned about their plight and does not care whether they are at a loss or profitable and I don’t think this was the intention of the CBN in making this policy. It is also important to note that the benefits that CBN highlighted to be derived from this new policy on Diaspora remittances can also be enjoyed from export proceeds if the same policy is applied.
According to the CBN, this new policy on Diaspora remittances helps to improve remittances inflow and so also is export proceeds inflow if encouraged with similar policy. This new policy on Diaspora remittances helps to improve balance of payment position and so also is export proceeds inflow if encouraged with similar policy. This new policy on Diaspora remittances helps to reduce the dependence on external borrowing and so also is export proceeds inflow if encouraged with similar policy. This new policy on Diaspora remittances discourage the diversion of inflows meant for Nigeria and so also is export proceeds inflow if encouraged with similar policy.
This new policy on Diaspora remittances will aid the effectiveness of foreign exchange management framework and so also is export proceeds inflow if encouraged with similar policy. This new policy on Diaspora remittances will reduce the rate of foreign exchange and so also is export proceeds inflow if encouraged with similar policy. This new policy on Diaspora remittances will deepen the foreign exchange market and so also is export proceeds inflow if encouraged with similar policy. This new policy on Diaspora remittances will improve foreign exchange liquidity in the country and so also is export proceeds inflow if encouraged with similar policy. This new policy on diaspora remittances will create more transparency in the administration of foreign exchange transactions and so also is export proceeds inflow if encouraged with similar policy. This new policy on Diaspora remittances will guarantee that recipients of remittances will receive a market-reflective exchange rate for their inflow and so also is export proceeds inflow if encouraged with similar policy.
I have also heard some people say that, this is the regulation that must be followed and I say what is the usefulness of a regulation that is hindering the progress of businesses in the country. This regulation will most likely end up encouraging sharp practices because some exporters might begin to use this Diaspora remittances to bring in the export proceeds and that means the CBN will still not have achieved the objectives of getting exporters to repatriate the proceeds. The question that I think the CBN should be asking is why are the exporters not repatriating the funds through the expected account and rather than saying that the proceeds are not repatriated. It is important to state that the fact that exporters cannot access the export proceeds in the export domiciliary account and sell it to whomever they so desire at an agreed price is the reason why many of them have refused to use this account.
I will like to state clearly that most exporters particularly those trading in commodities will be at a loss if they sell their export proceeds at the controlled price in the I & E window because the raw materials they exported are sourced from farmers and miners who have benchmark their local prices using the exchange rates in the parallel market.
Finally, I will like to therefore recommend that, if the CBN wants the exporters to repatriate export proceeds through the export domiciliary account then the exporters should be allowed to access it in line with the unfettered access policy that was in existence before it was stopped in 2016 when the CBN redefined the concept of unfettered access. If the CBN in its wisdom thinks this policy is best for the economy then it should ensure that a convergence of the exchange rate is achieved in order to reduce the cost of procurement of commodities in the local markets, which will consequently lead to profitable exportation of commodities. After the CBN must have done this, then it has every reason to then enforce this policy if any exporter is still found wanting.
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