What Is CBN’s ‘Naira 4 Dollar’ Scheme All About? Why Are They Introducing It?

As the naira continues to struggle against the dollar and Nigeria’s economy continues to experience significant challenges, the Central Bank of Nigeria (CBN) is relentlessly trying to increase the inflow of diaspora remittances into the country, considering that it strengthens the economy and may influence the stabilization of the exchange rate of the naira.

Just three months after the CBN announced that diaspora remittances would no longer be received in naira, the apex bank has now introduced a new “Naira 4 Dollar scheme.” In line with the new scheme, anyone who receives diaspora remittances through CBN-licensed IMTOs will be paid the sum of N5 for every $1 that is received as remittance inflow. The new policy is set to take effect for three months, from Monday, 8th of March, 2021, to Saturday, 8th of May, 2021.

According to a forecast by PwC, Nigeria’s remittance inflow could grow to $34.89 billion by 2023. The new CBN policy is one of the efforts of the CBN to attract diaspora remittances, and possibly meet or exceed this projection, in order to stabilize the naira and boost the nation’s economy, just like crude oil export does for the nation. The policy is also aimed at encouraging Nigerians in diaspora to remit funds through CBN-approved channels, thereby, restricting the “promo” to only funds that are received through approved IMTOs. This is coming just a few weeks after the CBN banned the operation of crypto exchanges who would have been cheaper and faster alternatives for cross-border remittances.

The Naira 4 Dollar scheme, however, is not the first of its kind to be implemented by nations across the globe. In 2019 and 2020, respectively, Bangladesh and Pakistan introduced incentives to attract diaspora remittances. Pakistan’s incentive schemes boosted the country’s remittance inflow from $20 billion in 2018 to $28 billion in 2020, a 40% increase despite the Covid-19 pandemic in 2020. Bangladesh also experienced a similar boost in its remittance inflow, with a 45.03% increase from $15 billion in 2019 to $21.9 billion in 2020.

This new strategy is largely hinged on the assumption that it would attract a higher influx of diaspora remittances because people would want to enjoy the monetary benefits that come with it, which would incentivize them to send more funds to the country. However, it is important to examine whether a N5 bonus for every $1 that is remitted is actually sufficient to incentivize more people to send funds from outside the country. Currently, bank and wire transfers, which are the most common ways of sending money to Nigeria, are relatively expensive and slow. The high rates and time taken to send money through official channels make it extremely stressful and expensive for Nigerians to utilize these channels to send funds. Also, the Covid-19 pandemic has significantly affected the financial situation of many Nigerians living abroad, thereby, limiting the ability of Nigerians in diaspora to send funds to the country. Therefore, it is not really certain if a N5 rebate would be able to attract Nigerians to take advantage of this short-term opportunity to send more money home and do so using the same CBN-licensed channels which are majorly cumbersome alternatives.

While some members of the public expressed optimism towards the introduction of the new policy, others believe it is not the way forward. With Nigeria’s excessive dependence on oil to boost foreign exchange reserves and strengthen the economy, a lot of people believe that diversifying the economy by increasing the export of non-oil products is actually a more sustainable and efficient way to strengthen the economy than this new scheme.



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