CBN Grants Unfettered Access to Forex from Diaspora Remittances

•Clarifies eligible transactions in line with global best practices

“Anyone who receives foreign exchange through these remittances is free to use them as he deems fit without let or hindrance from their banks in any currency of their choice,” Says CBN

By Obinna Chima

The Central Bank of Nigeria (CBN) yesterday unveiled a new policy that grants unfettered access to Forex from Diaspora and other money transfer remittances like Western Union and MoneyGram.

The bank also clarified transactions that are eligible under the policy in line with global best practices.

The policy allows beneficiaries of Diaspora remittances through International Money Transfer Operators (IMTOs) to henceforth receive such inflows in the original foreign currency through the designated bank of their choice.

It explained that the new regulation is part of efforts to liberalise, simplify and improve the receipt and administration of Diaspora remittances into Nigeria.

The central bank announced the new policy in a circular titled: “Amendment to Procedures for Receipt of Diaspora Remittances,” dated November 30, 2020, that was signed by its Director, Trade and Exchange Department, Dr. Ozoemena Nnaji, a copy of which was obtained by THISDAY yesterday.

With the new policy, recipients of remittances may have the option of receiving such funds in foreign currency cash (US Dollars) or into their ordinary domiciliary account.

“These changes are necessary to deepen the foreign exchange market, provide more liquidity and create more transparency in the administration of Diaspora remittances into Nigeria,” the apex bank stated.

It explained that the changes would help finance a future stream of investment opportunities for Nigerians in the Diaspora, while also guaranteeing that the recipients of remittances would receive a market- reflective exchange rate for their inflows.

It said all authorised dealers and the general public should note that beneficiaries shall have unfettered access and utilisation to such foreign currency proceeds, either in cash and/or in their Domiciliary Accounts. There was an initial confusion with the phrase “eligible tansaction” which senior authoritative CBN officials told THISDAY last night means minimal clarifications like “source of fund” and “beneficiaries” in line with current global practices. According to the CBN officials, “anyone who receives foreign exchange through these remittances is free to use them as he deems fit without let or hindrance from their banks in any currency of their choice in line with its circular TED/FEM/FPC/GEN/01/010.”

The bank urged strict compliance with the new guidelines.

In a separate circular titled: “Operations of Domiciliary Accounts,” also signed by Nnaji, the central bank clarified that following different interpretations on the operationalisation of domiciliary accounts and to ensure the stability of the foreign exchange market, export proceeds domiciliary accounts would continue to be operated based on existing regulations, which allow its holders use of their funds for business operations only, with any extra funds sold in the Investors & Exporters’ (l&E) Window.

On the other hand, it stated that for ordinary domiciliary accounts, where such accounts are funded by electronic/wire transfer, account holders would be allowed unfettered and unrestricted use of the funds for eligible transactions.

But it said where accounts are funded by cash lodgments existing regulation will continue to apply, explaining that the clarifications were necessary given the vastly improved capabilities of the CBN to monitor transactions, forestall money laundering and prevent the adverse effect of dollarisation in our economy.

“All authorised dealers and the general public are to note that Bank Verification Number would be used to enforce compliance with these regulations. Please be guided accordingly,” it stated.

The World Bank recently predicted that inflow of Diaspora remittance to Nigeria would drop by $2 billion in 2020 to $21.7 billion as against the $23.8 billion the country recorded in 2019.

The World Bank in a report had hinged the decline in remittances from Nigerians living abroad on account of the double whammy of the COVID-19 pandemic and the attendant economic crisis that has continued to spread.

Globally, the bank had also anticipated that the amount of money migrant workers send home would decline by 14 per cent by 2021, compared to the pre-COVID-19 levels in 2019.

It stated: “Remittances are helping to address the impact on African households. Nigeria remains the largest recipient of remittances in the region and is the seventh largest recipient among LMICs, with projected remittances to decline to around $21.7 billion, a more than $2 billion drop compared with 2019.”

According to the report, remittance flows to low and middle-income countries (LMICs) are also projected to fall by seven per cent to $508 billion in 2020, followed by a further decline of 7.5 per cent, to $470 billion in 2021.

It had stated that the foremost factors driving the decline in remittances included weak economic growth and employment levels in migrant-hosting countries, weak oil prices; and depreciation of the currencies of remittance-source countries against the US dollar.