Cardoso Drives Remittance Growth

Donatus Eleko

Nigeria’s economy has received a much-needed boost, thanks to a surge in remittance inflows. At the helm of this positive development is the Central Bank of Nigeria (CBN) Governor, Mr. Olayemi Cardoso. Under Cardoso, despite economic challenges, Nigeria has managed to maintain a steady flow of remittances which many analysts have described as a critical lifeline for the nation’s economy.

The latest data released by the central bank showed that inflows through International Money Transfer Operators (IMTOs) grew by 47 per cent to $2.33 billion in the first six months of 2024, from $1.58 billion in the same period of 2023. This is coming at a time when the CBN implemented policy measures that permit eligible IMTOs access to naira liquidity at the official foreign exchange window.

The CBN recently instituted some policy measures to make the forex markets more efficient and increase remittance flows through formal channels.

In a circular signed by the acting Director of the Trade and Exchange Department, Dr. W.J. Kanya, the apex bank said the measure would enable IMTOs to access naira liquidity at the official window, thus, enabling the timely settlement of diaspora remittances.

The apex bank noted, “The bank has implemented measures that will enable eligible International Money Transfer Operators to access NGN liquidity at the CBN window. These measures are aimed at widening access to local currency liquidity for the settlement of diaspora remittances.

“Therefore, eligible IMTO operators will be able to access the CBN window directly or through their authorised dealer banks to execute transactions for the sale of foreign exchange in the market.”

From the numbers released by the apex bank, it could be inferred that the country’s net foreign exchange inflows to Nigeria’s economy increased by 67.8 per cent to $27.6 billion in the first half of 2024 from $16.44 billion in 2023.

Figures from the CBN’s quarterly economic statistics revealed that the development was because of a 34.6 per cent increase in net inflows through autonomous sources and a 170 per cent increase in net forex inflow through the Central Bank of Nigeria in the same period.

The forex inflow to the economy grew in the period by 41.6 per cent to $47.73 billion in first half 2024, and from $33.7 billion in first half 2023.

Gross inflows through autonomous sources also grew by 47.6 per cent year-on-year to $31.15 billion in first half 2024 from $21.16 billion in first half 2023.

Since he assumed office last year, Cardoso has intensified his engagement with Nigerians in the diaspora as well as foreign investors, hosting forums and town hall meetings to understand their needs and concerns. The driving force has been his desire to continue to encourage the flow of remittances to the country.

According to the CBN Governor, having addressed concerns raised by IMTOs and with the assurances from Nigerians in the Diaspora, the apex bank was confident that it would attract $1 billion monthly remittances.

According to Cardoso, “Nigeria has such a strong diaspora community here; in the earlier stages of the reforms, IMTOs were having issues transferring money back to Nigeria, and we felt it was important to engage them, and we did. As a result of that engagement, we identified particular problems, of which a lot of responsibility was shared. Things have since improved because as at the last meetings, which was, I think, April, monthly inflows were about $250 million, but as of September, it had risen to $600 million.

“With the recent announcement by Nigeria Interbank Settlement Systems (NIBBS) on Bank Verification Number (BVN), and other products that the banking industry is offering, and through engagement with the diaspora, we believe we will be able to move accordingly and again, rising from that engagement, we put our sights on increasing the inflows to $1 billion monthly and I’m confident that we will get there.”

To further boost Investors’ confidence in the Nigerian economy, the CBN governor disclosed that the apex bank was doing everything possible to remove Nigeria from the Grey List. A grey list is a list of countries with shortcomings in tackling illicit financial flows.

Countries on the grey list are under increased monitoring by the Financial Action Task Force (FATF) due to perceived weaknesses in their anti-money laundering (AML) and combating the financing of terrorism (CFT). FATF leads global action to tackle money laundering, terrorist, and proliferation financing.

“In the last one year, our focus has been on the exchange rate, enhancing financial systems provision, fostering financial inclusion, and enhancing transparency in our monetary policy decisions and communications.

“We embarked upon bold and necessary reforms to return to the path of monetary policy orthodoxy, as well as remove observed distortions in the foreign exchange market. Our efforts have yielded significant progress as volatility in the foreign exchange market has abated measurably and remittances have also increased significantly; we have achieved increased transparency and improved overall supply in the foreign exchange market, leading to reduced arbitrage and speculative activities and eliminated the front loading of foreign exchange demand,” Cardoso said.

“We aim to reduce transaction costs and expand financial access, ensuring that every Nigerian, regardless of location or demographic, can meaningfully participate in our evolving financial system regarding our commitment to orthodox monetary policy.

“Let me reiterate our determination to follow this path through a sequenced approach to tackling all challenges ahead. We recognise the continued support of our key stakeholders, including investors, banks, Nigeria diaspora, and businesses with our counterparts on the fiscal side, we have strengthened collaboration over the past year by establishing several joint committees.

“These committees are designed to drive actionable outcomes, creating impactful platforms for stakeholder engagement and delivering concrete solutions to align monetary policy with fiscal operations more effectively. I’m confident that with our collective efforts and sustained commitment, we can pave the way for a more prosperous Nigeria that fosters robust and inclusive growth,” he added.

For instance, Cardoso during an engagement with Nigerians in the diaspora on the sidelines of the just concluded International Monetary Fund/World Bank Annual Meetings, told the diasporans that, “As far as we are concerned, it is totally unacceptable that you should be out here and be having hassles in operating your accounts or doing your business in your original country.”

Cardoso also stressed in another engagement with foreign investors that price stability is being restored gradually in the country due to the tight monetary policy stance of the apex bank. This, he said, is aimed at taming inflation, rebuild confidence and regain market credibility.

The CBN governor told his audience, that, “confidence has returned to the market and there is also confidence by Nigerians in their currency. A situation where interest rate has gone up, we expect that there would be more interest in local currency instruments.

“Something else that is important in these whole adjustments in the Nigerian economy is the fact that Nigerians would be more inclined to produce locally because it is a lot cheaper for them to do so, rather than depend on imported goods.”

The surge in remittances has led to a growth in Nigeria’s foreign reserves that climbed to $40.2 billion in October 2024, up from $38.4 billion recorded in September. This marked a significant boost in the country’s financial position.

Cardoso revealed that Nigeria’s gross external reserves stood at $39.29 billion as at end of September 2024, an increase of 9.38 per cent from $35.92 billion as at the end of August 2024. This was due mainly to third party receipts, forex transactions and crude oil-related taxes. The gross external reserves position as at the end of September 2024 could provide 14.34 months of import cover for goods and services and 15.84 months of import cover for goods and services. The ratio of reserves to short-term debt stood at 125.44 per cent, exceeding the threshold of 100 per cent and suggesting that the reserves could cover short-term external debt.

The increase in foreign reserves was a direct result of the government’s decision to allow the market to determine the naira’s value instead of continuous Central Bank interventions. In the past, significant sums were spent monthly defending the naira, a practice that has now been curtailed to promote long-term economic stability. By letting the market dictate the exchange rate, Nigeria is avoiding excessive foreign exchange interventions while organically boosting reserves.

“We’re allowing the market as much as possible to set the level for the naira, and we are building the buffers to improve that confidence and ensure that we have enough input cover,” he added.

Indeed, Cardoso’s visionary leadership has set the stage for a new era of remittance growth in Nigeria. By fostering a conducive environment for remittances, the CBN is empowering Nigerians in the diaspora to play a pivotal role in the nation’s economic transformation. As the CBN continues to implement innovative strategies, Nigeria is poised to become a global remittance hub.