Central Bank of Nigeria Naira for Dollar Scheme is set boost International Remittance in a bid to fight the use of Crypto
March 10, 2021 12:06 PM
Nigerian Central Bank (CBN) announced a new Scheme that could improve the country's international remittances as they seek to improve the use of approved ways when Nigeria's are receiving funds from abroad.
The move to encourage recipients comes after the nations official remittances inflow dropped as recipient opted for cheaper alternative means which resulted in the rise of crypto usage in the country.
The naira for dollar scheme will pave way for recipients of international remittance to be qualified for an extra payment of approximately 5 naira ($0.012) for $1 received. This scheme is only valid for a duration of 60 days according to the CBN.
CBN says its mission is to “increase the inflows of remittances from diaspora into the country.” during the announcement. According to the letter which explains how the scheme works, the CBN said:
CBN shall through commercial banks, pay to remittances recipients the incentive of 5 Naira for every USD 1 remitted by the sender and collected by the designated beneficiary, and will be paid to the recipient whether they transfer the Dollar to their domiciliary account or take the USD as cash across counter.
The officials of CBN are confident that the incentive scheme will increase the inflow of remittances into the country via the banking ecosystem. Although according to the letter the scheme is set to end by May 8.
Tapping into Unofficial Exchange Rate
Nigeria experienced huge decline in remittance as Nigerians switched to using cryptocurrencies in a bid to exploit the parallel exchange rate when converting USD to naira. As the gap widens between the official and parallel exchange rate, companies who use crypto when moving funds across the border saw a massive increase in transaction volume as inflow via official channels start to drop.
The CBN past attempt to boost the inflow of foreign exchange has resulted in naira devaluation with the first announced in March 2020 as the dollar to naira official exchange rate moved from 1:307 to 1:360. They made another attempt four months later as it was adjusted to 1:380, it's recent devaluation moved the exchange rate to 1 USD for 410 naira.
However, at press time the parallel market rate is still trading at 1 USD to 475 naira. It is yet to be noticeable if the incentive scheme is going to achieve the goal of returning the inflow of international remittance to the nation back to its previous heights.