Uncertainty looms large over Nigeria’s foreign exchange market. IMF’s analysts opine that this is one of the major reasons for the drop in cross-border remittances into the country. The IMF analysts highlighted that the uncertainty in Nigeria’s exchange rate was the major contributory factor for the 28% drop in the flow of remittances into Nigeria. The general uncertainty in the foreign exchange market has not been encouraging for remittances to come into Nigeria.
The lockdown imposed due to the Covid-19 pandemic is another contributing factor to the reduced flow of cross-border remittances into Nigeria.
According to a report in bitcoin.com, the insistence by Nigeria, that an overvalued exchange rate be used has dissuaded Nigeria’s overseas population to avoid official channels for processing their remittances. The overvalued exchange rate has contributed to Nigerians using cryptocurrency-based, or other alternative channels for their remittances into Nigeria.
Reforms in the Forex Market
The Central Bank of Nigeria (CBN) is now striving to reverse the reduced flow of remittances. In this effort, the central bank has launched the “naira for dollar” scheme. IMF maintains that the remittance inflow will only improve if the forex market is reformed. The reforms in the forex market should try and move Nigeria towards having a single unified forex market. This will bring down the uncertainty and raise general confidence. More remittance inflow will follow as a natural consequence and that can be captured by the financial sector.
The IMF analysts re-iterated, that the lack of reforms in the form market is the major contributor to the prevailing uncertainty. Only with reforms can Nigeria hope to see an uptick in the inflow of remittances sent using formal channels.