The Central Bank of Nigeria (CBN) has attributed the ongoing decline of the Naira against the dollar to the influx of unofficial diaspora remittances.
Speaking at the National Institute for Security Studies in Abuja, Folashodun Shonubi, the acting governor of the apex bank, delivered a lecture titled “Diaspora Remittances and Nigeria’s Economic Development” for members of the Executive Intelligence Management Course (EIMC) 16.
The Naira reached a historic low of N925/$1 on the parallel market recently, primarily due to increased demand for foreign currency surpassing its supply.
This drop follows the liberalization of the foreign exchange regime, a notable departure from the approach during the President Muhammadu Buhari-led administration.
Shonubi explained that numerous diaspora remittances flowed into Nigeria in the form of dollars, evading official records and ending up in the black or parallel markets.
He emphasized that this phenomenon poses challenges, as the unregulated nature of the black market makes it conducive for illegal activities.
Individuals involved in misconduct often resort to the black market to convert money into dollars due to its anonymity and ease of use.
Acknowledging that some of the funds circulating in the black market originate from diaspora remittances, Shonubi stressed the importance of understanding these dynamics.
He pointed out that many countries, even developed ones like India and China, rely heavily on remittances for foreign exchange.
Shonubi highlighted the need to control illegal remittance channels, redirecting funds towards legitimate avenues to bolster economic growth.
Drawing attention to the significance of diaspora remittances, Shonubi indicated that they contributed more to the country’s economy than the construction industry in 2021.
He emphasized the desire to collaborate with the banking system to streamline remittance processes, noting that sending money to Sub-Saharan Africa remains costlier due to lower transaction volumes.
Shonubi expressed concern about the lack of information regarding black market pricing, making it challenging to manage foreign exchange rates effectively.
He gave an example of how small transactions could disproportionately influence the closing rate in the absence of comprehensive data.
In closing, Shonubi underscored the vital role that diaspora remittances play in numerous countries’ economies, emphasizing the need to harness their potential for Nigeria’s growth.
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