Diaspora remittances constitute the most underrated foreign exchange earner for the country.
These huge sums of money that support individuals, households and small businesses are the reasons we should consider renaming the 'japa' syndrome 'brain gain,' instead of 'brain drain.' The latest enabler of this transformation from 'brain drain' to 'brain gain' is the Central Bank of Nigeria (CBN) Governor, Olayemi Cardoso.
Greener pastures and brain drain are two phrases that made it into Nigeria's national lexicon in the 1970s and 1980s, as the country's youths began to emigrate in droves in search of the educational, professional and economic fulfilment, as well as the good life that had become the exclusive luxury of the few soldiers and politicians in power, back home. Social scientists called it brain drain because the country lost its best teachers, engineers, doctors, nurses, sportsmen, etc. to serious countries who were more than willing to provide the enabling environment for them to thrive. Nigeria's loss was their gain as these professionals have continued to add a lot of value to those societies at the expense of their country of birth and origin.
But there is no place like home. These nationals still have parents, siblings and friends back home who they care about. They also look back and invest in the country in terms of businesses and philanthropy. So, the huge sums of money, often in hard currencies, that these men and women send across to Nigeria on a regular basis have contributed in no small measure to reflating the economy.
These diaspora remittances constitute the most underrated foreign exchange earner for the country.
Remittances are household incomes from foreign economies, arising mainly from the temporary or permanent movement of people to those economies. Remittances include cash and non-cash items that flow through formal channels, such as electronic wire, or through informal channels, such as money or goods carried across borders.
According to the International Monetary Fund (IMF), remittances help poorer recipients meet basic needs, fund cash and non-cash investments, finance education, foster new businesses, service debt and essentially drive economic growth.
According to the World Bank, the Nigerian Diaspora of about 1.7 million people remitted $65.34 billion in three years to boost economic activities in the country. According to the Bank, in 2018, the Nigerian Diaspora's remittance was $24.31 billion; in 2019, it dropped to $23.81 billion; and in 2020, it fell to $17.21 billion.
These huge sums of money that support individuals, households and small businesses are the reasons we should consider renaming the 'japa' syndrome 'brain gain,' instead of 'brain drain.' The latest enabler of this transformation from 'brain drain' to 'brain gain' is the Central Bank of Nigeria (CBN) Governor, Olayemi Cardoso.
There are possibilities, however, that the Nigerian Diaspora population is larger than what has been officially captured. The Chairman of the Nigerians in Diaspora Commission (NIDCOM), Mrs Abike Dabiri-Erewa, had in 2017 said there were about 15 million Nigerians in various parts of the world.
There is also another possibility that remittances to Nigeria are much higher than have been officially captured. This is because many Nigerians abroad explore unofficial ways of sending home money in order to maximise unofficial exchange rates.
CBN spokeswoman, Hakama Sidi-Ali, stated that the initiative will help increase the sustained supply of foreign exchange in the official market by promoting greater competition and innovation amongst IMTOs to lower the cost of remittance transactions and boost financial inclusion.
Meanwhile, Nigeria recorded $282.61 million as total direct foreign exchange (FX) remittances in the first quarter (Q1) of 2024.
The figure represents a decrease of $18.96 million or 6.28 per cent compared to the $301.57 million remittances recorded in Q1 2023.
In Q1, this year, the remittances stood at $138.56 million in January, however it dropped to $39.14 million in February, before rising to $104.90 million in March.
Governor Cardoso has, therefore, introduced a couple of reforms to enhance diaspora remittances and make sure Nigeria does not miss out of a dime that should come into the economy.
Cardoso's Strategic Moves
As part of measures to raise foreign exchange liquidity, the apex bank introduced a couple of reforms in the FX market.
In 31 January, the apex bank said International Money Transfer Operators (IMTOs) will no longer facilitate money transfers from Nigeria to other countries.
On 20 April, the CBN announced its collaboration with IMTOs to collectively commit to doubling remittance flows through formal channels into Nigeria.
Most recently, the CBN granted 14 new IMTOs Approval-in-Principle (AIP) to expand the market and help double foreign-currency remittance flows into the country through the formal channel.
CBN spokeswoman, Hakama Sidi-Ali, stated that the initiative will help increase the sustained supply of foreign exchange in the official market by promoting greater competition and innovation amongst IMTOs to lower the cost of remittance transactions and boost financial inclusion.
By implementing these crucial reforms and driving more revenue into the system, the Cardoso-led CBN is also helping to reflate the economy, support the emergence of more investments which pay more taxes, create more jobs, and more wealth.
"This will spur liquidity in Nigeria's Autonomous Foreign Exchange Market (NAFEX), augmenting price discovery to enable a market-driven fair value for the naira.
"The CBN viewed increasing formal remittance flows--one of the major sources of foreign exchange, accounting for over 6% of GDP--as a means of reducing the historical volatility in Nigeria's exchange rate caused by external factors, such as fluctuations in foreign investment and oil export proceeds.
"The increase in the number of IMTOs is one of the primary actions initiated by the CBN's remittance task force, overseen by Governor Cardoso as a collaborative unit pulling together specialists to work closely with the private sector and market operators to facilitate the ease of doing business in the remittance ecosystem in Nigeria.
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"The task force was established as a direct result of an executive learning session with IMTOs during the World Bank/IMF Spring Meetings held in Washington DC, United States of America, in April 2024. The task force will meet regularly to implement strategy and monitor the impact of its measures on remittance inflows," she stated.
Last Line
Everything Cardoso does, the naira is the target and the strength of the national currency has far-reaching consequences for inflation, the purchasing power and profitability of small businesses across the country.
The CBN is committed to ensuring that more diaspora funds in different foreign currencies are remitted to Nigeria and their equivalents are given to the beneficiaries in naira. This will strengthen the naira in multiple ways.
The naira has recently fought back against the dollar and it is gaining momentum again. This is not unconnected to the latest CBN policy on IMTOs.
By implementing these crucial reforms and driving more revenue into the system, the Cardoso-led CBN is also helping to reflate the economy, support the emergence of more investments which pay more taxes, create more jobs, and more wealth.
Abdulrahman Abdulraheem is the author of eNaira Revolution: A Peep into Nigeria's Cashless Future.
