Following low oil prices in 2016 & the country entering a recession, the CBN implemented strategies to harness the potential of Diaspora Remittances which was the highest non-oil foreign exchange earner in the country. As at 2015, it was estimated to stand at over $20.5 Billion.
It’s a thread 🧵 Diaspora Remittances is a service sector that is involved in the transfer of money often by a foreign worker to an individual in their home country. Global remittances is a $700 Billion industry & a source of foreign inflows to developing countries such as 🇳🇬
There are at least 17 Million Nigerians living in the diaspora with the USA 🇺🇸 and UK 🇬🇧 having the the largest proportion of Nigerian immigrants.
Remittance business in Nigeria is dominated by the Big Three - Moneygram, Western Union and Ria.
Remittance business in Nigeria is dominated by the Big Three - Moneygram, Western Union and Ria.
Prior to 2016, these were the only licensed International Money Transfer Operators (IMTO) in the country. Payouts were in dollars until late 2013, when the CBN stopped same as 🇳🇬 was the second largest importer of dollar cash in the world after Russia. Payouts are now in Naira
Prior to this time, there have been informal Money Transfer Operators who had partnered with various banks in the country to make payouts. These operators charged significantly lower remittance rates and were located in various countries with agent locations.
Some players make direct naira payments to Beneficiary accounts at favorable rates. They increased their market share over time. These include World Remit, Transfast to mention a few.
Following the drop in oil prices in 2014 and the naira being devalued with a huge gap between the official rate and the black market rate in 2015, it seemed a good business venture to remit funds to Nigeria.
Most beneficiaries of Diaspora remittances opened domiciliary accounts with local banks to receive such inflows and sell same accordingly, considering that Nigerian banks stopped receiving dollar cash lodgments in 2015.
Now with dwindling foreign reserves in 2016, to manage the crisis with increasing paucity of dollars 💵 in the economy, the CBN introduced the flexible FX regime in June 2016. A series of modalities were introduced to moderate the IMTOs.
This included the sale of their dollar inflows to their respective agent banks which then were sold to licensed Bureau De Change operators in the country. This didn’t get the desired traction as expected.
There was a backlog of over $6 Billion in FX demand at the time. Following the transition from the GEJ government to PMB, it was alleged that the value of the FX reserves bandied about were false. Leading to order management of the sale of FX to Banks and their customers.
The CBN began to monitor accounts with significant & frequent dollar inflows. There were over twenty unlicensed operators that were identified whose activities had a semblance of the IMTOs.
The apex bank ordered that the Banks who banked these economic saboteurs should immediately freeze their accounts. The banks were also penalized
CBN issued a press release in the aftermath of this action. There was also a backlash. The CBN compelled the aggrieved players to obtain their license as this action seemed to favour the Big3. These unlicensed operators were duly licensed by the CBN. 
Now with the Coronavirus pandemic leading to a global collapse of commerce, crashing oil prices and plummeting the market capitalization of stock exchanges from New York to Tokyo, it is quite obvious that Diaspora Remittances will drop significantly.
With possible furloughs and countries on lock down, this will adversely impact remittances to the country. Low accretion to foreign reserves, dwindling diaspora remittances, these are indeed perilous times for Nigeria from an economic stand point.
Nigerians began to panic buy the greenback for fear of imminent devaluation. The naira depreciated against the dollar from N360/$1 to over N400 barely 10 days ago
The CBN issued a press release on March 12 in which it shared its displeasure regarding the speculative activities of unscrupulous players which has led to a rapid depreciation of the Naira.
The apex bank informed the public that they were working will employ with the NIGERIAN FINANCIAL INTELLIGENCE UNIT to identify these entities and mete out punitive measures against them. Assuring Nigerians that our FX reserves were robust
This lead to some sanity in the market as the naira appreciated to initial levels but rapidly depreciated in the last week to N380
IMTOs in the country which have been growing since 2016 operate based on the following modus operandi. They inflow their remittances to their agent banks and same is sold at N357. The bank takes 25% while the balance is sold to CBN. CBN now sells these funds to licensed BDCs.
However, if the global economy continues to slow down with the reactive measures as seen recently , a lot can be imagined on how far the CBN will defend the naira. 🇷🇺 & 🇸🇦 are still at war with oil prices. The supply & demand shock has its cataclysmic effects on our economy.
In a turn of events, it has been revealed that the apex bank has told agent banks to increase the rate for FX sale to Foreign Portfolio Investors(FPI) from N366.70 to N380.20 at the Investors & Exporters (I & E) FX window which was established in 2017 proving FX liquidity to 🇳🇬.
Futthermore, a letter to banks revealed that the IMTO rate has moved up further to N376 from N356. Sales to CBN from N357 to N377. CBN Sales to BDC from N358 to N378. BDC Sales to end users from N360 to N380. Invariably, the naira has been devalued by N20.
We all knew that it was going to happen sooner or later. Experience has shown that it is usually the case. These rates come to effect on March 23. It is quite likely that the wholesale and retail windows might merge with this, only time will tell @BBoason. End of thread 🧵
