May 24, 2021 / 10:00AM / Ottoabasi Abasiekong for WebTV / Header Image Credit: WebTV
Holistic reforms in Nigeria's foreign exchange market will attract significant Diaspora investments. The Head of Consulting, Agusto & Company Limited, Mr. Jimi Ogbobine, made this point at a recent discussion on "Diaspora Remittances and Nigeria's Economic Growth".
He believed the experience of Egypt which remains Africa's leader in diaspora remittances should serve as a subject-matter reference case for Nigeria on the importance of a deliberate, singular-focused, and intentional reform of the FX market.
Egypt experienced a 2% drop in its diaspora remittance from $26bn in 2019 to $24bn in 2020, while Nigeria experienced a 4% drop from $25bn in 2019 to $21bn in 2020 due to the COVID-19 pandemic.
The analyst called on Nigeria to move from taking its FX reforms in drips that have not been effective to a more robust approach that would yield better results.
He noted that repatriating capital out of Nigeria was a huge challenge that would serve as a disincentive to attracting Foreign Direct Investments (FDI) and even Foreign Portfolio Investments (FPIs).
Ogbobine said the reforms would lead to more Diaspora funds being channeled to investment in critical areas that would support economic activities in Nigeria, beyond consideration of the welfare needs of family members.
On the activities of the Nigerian Diaspora Commission and plans for an Infrastructure Fund that could attract investments, he noted the need for clarity and an effective structure that would improve inflows to the economy.
Assessing the "Naira 4 Dollar Scheme" by the Central Bank of Nigeria (CBN) he said the game-changer was the ability of recipients to receive their money in hard currency.
He highlighted the issues of multiple FX markets like the I & E window and the parallel market, which have to be addressed to achieve a unified market structure. He called for monetary policy stability which was critical for the nation to attract more investments.
Looking at the Agusto 2021 Diaspora Remittance report, he said one of the key takeaways was that Nigerians in the diaspora were knowledgeable about the developments in the Nigerian economy.
The report also highlighted the formalization of the informal channels in remittances, which the CBN has responded to with initiatives like the "Naira 4 Dollar" scheme.
On the performance of the global diaspora remittances in 2020, he admitted that the COVID-19 pandemic adversely affected economic activities through the lockdowns across regions.
Global remittances in 2020 dropped by 7% from $717bn in 2019 to $666bn with Mexico the only country among the top 6 recipients, experiencing a significant of about 3% from $38.7bn in 2019 to $40.5bn.