Over the past few weeks, the Central Bank of Nigeria ("CBN") has issued circulars amending and clarifying the procedure for receipt of diaspora remittances ("the Circulars").1
According to the CBN, the Circulars were issued in an effort to liberalise, simplify and improve the receipt and administration of diaspora remittances into Nigeria. It was also stated that the clarifications and amendments are aimed at stabilising and deepening the foreign exchange market, providing more liquidity, and creating transparency, especially in the administration of diaspora remittances into Nigeria.
The initial circular issued on 30 November 2020 ("the 1st Circular") to all authorised dealers and the public states that2:
This point was further clarified by the TED/FEM/FPC/GEN/01/010 circular issued by the CBN on the same day (the 2nd Circular).4 In this circular, it was stated that where ordinary domiciliary accounts are funded by electronic/ wire transfer, account holders would be allowed unrestricted use of the funds for eligible transactions. However, were funded by cash lodgments, existing regulation will continue to apply. Export Proceeds Domiciliary Accounts will also continue to be operated based on existing regulations (i.e., use of funds in the account for business operations only).
The 1st Circular was received with mixed reactions by stakeholders and the public. The CBN, in an attempt to clarify its position on the subject, issued a further circular TED/FEM/FPC/GEN/01/012 on 02 December 2020 ("the 3rd Circular")5 stating that:
In furtherance of this, the CBN on the same day issued a directive to DMBs, insisting that they must close all Naira general ledgers through which the Naira remittances were hitherto being carried out.7
In clarification of this new CBN policy, the CBN Governor, Mr. Godwin Emefiele, at a press conference in Abuja on 03 December 20208stated that the CBN had engaged with the DMBs and IMTOs to ensure that recipients of remittance inflows are able to receive their funds in the designated foreign currency of their choice, to enable smooth implementation of the new policy.
He highlighted some of the reasons for the adoption of this new policy as follows:9
The significant drop in inflows of the country: One of the factors that contributed to the significant drop in inflows of the country is the fact that IMTOs have over time resorted to engaging in arbitrage arrangements on the Naira-dollar exchange rate, rather than competing on improving transaction volumes and creating more efficient ways for Nigerians in the diaspora to remit funds.
Additionally, the CBN issued a circular on 16 December 2020 ("the 4th Circular") to IMTOs and Payment Service Providers ("PSPs") titled "Receipt of Diaspora Remittances: Additional Operational Guidelines"10. This additional guideline was issued owing to the disregard for the regulatory directive by some operators who continued to pay remittances in local currency. In summary, it provides that:
Impact of the new CBN Policy
Finally, according to the CBN, the current annual remittance inflow is about $24 billion. This could help in improving the balance of payment position and the foreign exchange rate; reducing dependence on external borrowing and mitigating the impact of COVID-19 on foreign exchange inflows into the country.12 This amongst others, is the reason CBN sought to support improved remittance inflows into the country through official channels.
The Nigerian economy has been bedevilled by several issues that require appropriate policy measures. Even though there are diverse views on the CBN policy by different stakeholders, it is worthy of note that parallel market has been calm and there has been a drop in the the Nigerian exchange rate since the issuance of the CBN circulars.13
It is therefore hoped that the introduction of the policy will achieve the set objectives by the regulators and its effect on the economy would outweigh whatever inconveniences it may pose on stakeholders.
1. The initial circular-Ref. No. TED/FEM/FPC/GEN/01/011, amending the procedure for diaspora remittances was issued by the CBN on 30 November 2020. A further circular with Ref no: TED/FEM/FPC/GEN/01/012 was issued on 02 December 2020. Also, a circular to IMTOs and Payment Service Providers (Ref No: PSM/DIR/CON/CWO/16/119) on receipt of diaspora remittances was issued on 16 December 2020
2. Amendment to Procedures for Receipt of Diaspora Remittances with Ref No: TED/FEM/FPC/GEN/01/011 available at file:///C:/Users/USER/Downloads/Amendment%20o%20Procedures%20for%20Receipt%20of%20Diaspora%20Remittances.pdf
3. It was further stated that this will be done in accordance with the CBN Circular TED/FEM/FPC/GEN/01/010 of 30 November 2020.
4. CBN Circular on Operations of Domiciliary Accounts, with Ref No: TED/FEM/FPC/GEN/01/010, available at file:///C:/Users/USER/Downloads/Circular%20Domiciliary%20Accounts%20Nov2020.pdf
5. Re: Amendment to Procedures For Receipt of Diaspora Remittances, available at file:///C:/Users/USER/Downloads/Diaspora%20Remittances%20Amendment.pdf
6. The two modes were stated in the initial circular as either by foreign currency cash or direct credit transfer to the beneficiaries' domiciliary account in Nigeria.
7. Referenced in the remarks by the Governor, Central Bank of Nigeria (CBN), Mr. Godwin Emefiele, CON on Improving Remittance Inflows into Nigeria. Thursday, December 3, 2020, available at https://www.cbn.gov.ng/Out/2020/CCD/Governor's%20Remarks%20Diaspora%20Remittances.pdf
8. Remarks by the Governor, Central Bank of Nigeria (CBN), Mr. Godwin Emefiele, CON on Improving Remittance Inflows into Nigeria. Thursday, December 3, 2020, available at https://www.cbn.gov.ng/Out/2020/CCD/Governor's%20Remarks%20Diaspora%20Remittances.pdf
11. Supra note 8
12. Supra note 8