According to the latest data from the World Bank, international remittances into Nigeria dropped by nearly 40%, from 23.8 billion U.S. dollars in 2019 to 17.2 billion U.S. dollars last year. Although this fall, remittances accounted for 4% of the country’s GDP, it is still an important source of foreign exchange for this oil-rich country.
Immigration Avoidance Official Channel
As shown by the data, Nigeria has only recorded an annual remittance of less than US$20 billion since 2011. This happened in 2016, when a total of US$19.7 billion in official remittances flowed into the Nigerian economy. However, the most recent decline is the second decline in transfers of funds by Nigerians abroad in the past decade.
At the same time, the devaluation of the naira and the consequent shortage of foreign exchange that year coincided with the recent plunge in remittances. In turn, this devaluation forced many in Nigeria’s diaspora community to avoid official remittance channels.
Although the Central Bank of Nigeria (CBN) did eventually depreciate the naira to the current exchange rate of 1:420. However, according to data from Abokifx, the exchange rate is still lower than the parallel market exchange rate of 1:480. In addition to the direct devaluation of the naira, CBN also instructed Nigerian financial institutions to stop providing services to the cryptocurrency industry. Nevertheless, the CBN’s plan to reduce the use of cryptocurrency seems to have failed, as can be seen from reports of growth in peer-to-peer trade.
CBN’s strategy to stop the decline in remittances
At the same time, CBN will launch an incentive program during the same period to encourage Nigerians abroad to use official channels when sending money home. As previously reported by Bitcoin.com News, under the program, Nigerian immigrants who send money through the official corridor will be entitled to an equivalent payment of US$0.012 per payment.
Although Nigeria’s financial authorities have now announced the incentive plan, it remains to be seen whether its extension can help restore the value of remittances to more than US$20 billion.
What do you think is the reason for the drop in the remittance amount? You can share your thoughts in the comments section below.
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