Central Bank of Nigeria (CBN) on 30 November 2020 issued two Circulars with Ref. Nos. TED/FEM/FPC/GEN/ 01/010 and TED/FEM/FPC/GEN/ 01/011 (“the Circulars”) to make clarifications on the operation of domiciliary accounts and amending the procedures for the receipt of diaspora remittances into Nigeria, respectively. The clarifications and amendments are aimed to stabilize and deepen the foreign exchange (FX) market, provide more liquidity and create transparency, especially in the administration of diaspora remittances into Nigeria.
The Circulars provide that:
Export proceeds domiciliary accounts would continue to be operated based on existing regulations, which allow the account holders to utilize their funds for business operations only, with any extra funds sold in the Investors & Exporters’ (l&E) Window.
Where ordinary domiciliary accounts are funded by electronic/ wire transfer, account holders would be allowed unrestricted use of the funds for eligible transactions. However, where funded by cash lodgements, existing regulation will continue to apply.
Beneficiaries of diaspora remittances through International Money Transfer Operators (IMTOs) shall receive such inflows in foreign currency (US Dollars) through designated banks of their choice. The beneficiaries will also have the option of receiving the funds in cash or by direct credit in their ordinary domiciliary accounts.
These are tough times for the Nigerian economy that require appropriate policy measures. The FX market has been particularly challenged with Naira/US$ exchange rate escalating to slightly above ₦500 in the parallel market in the week of 23 November 2020. It is gratifying to note that the CBN intervention in terms of FX supply has helped to calm the market with the Naira/US$ exchange rate now averaging between ₦460 and ₦470. The recovery of crude oil prices in 2017 helped to boost our FX reserves and drove down the parallel market rate from ₦520 high to average ₦360 – ₦365 until COVID-19 pandemic broke out and crude oil prices crashed again. To break this vicious cycle, we need to look beyond oil for most of our FX inflows and launch a new liberalized FX regime that will make Nigeria attract FX inflows from other sources, boost our FX reserves and stabilize the Naira exchange rate. At the same time, we must do more to promote non-oil export sector development and reduce our dependency on importation of goods and services that can be produced locally.