Despite efforts by the Central Bank of Nigeria (CBN) to attract foreign exchange into the country, total direct FX remittances dropped by 6.28 per cent Year-on-Year (YoY) to $282.6 million in the first quarter (Q1) ended March 31, 2024.
According to the Central Bank of Nigeria (CBN) “International Payments” data, total foreign exchange direct remittances in the first quarter of 2023 was at $301.57 million.
On a Month-on-Month (MoM) breakdown, the apex bank reported $138.56 million total direct remittances in January 2024, a growth of 75 per cent from $79.19 million in January 2023, while in February 2024, it stood at $39.15 million, a decline of 53.26 per cent from $83.76 million in February 2023.
In addition, total foreign exchange direct remittances were at $104.91 million in March 2024, a further decline of 24.3 per cent from $138.63 million reported by the apex bank in March 2023.
While concerns over the decline in total remittances to the country persist, Vice President of Highcap Securities Limited, Mr. David Adnori, suggests that there may not be cause for alarm at present. He attributes the decline in remittances in Q1 2024 to factors such as the weakening of the local currency and the policy directions of the CBN.
The CBN reported a total of $1.98 billion in direct remittances in 2023, down from $2.16 billion in 2022. However, the two months ago, the CBN disclosed a rise in overseas remittances into the country to $1.3 billion in February 2024 compared to $300 million in the preceding month. Nevertheless, the report by CBN revealed $39.15 million in total direct remittances in February 2024.
Mrs. Hakama Sidi Ali, Acting Director of Corporate Communications at the CBN, recently noted a significant rise in foreign inflows in February 2024, driven by higher remittance payments from Nigerians living abroad and increased purchase of naira assets by foreign portfolio investors.
The decline in direct remittances raises concerns about the economic impact on Nigeria, especially considering the significant role remittances play in supporting household income and overall economic stability.
NewsAnalytics Analysis
The decline in total direct FX remittances to Nigeria, as reported by the Central Bank of Nigeria (CBN), reflects a concerning trend that could have implications for the country’s economy. Here’s an analysis of the situation:
- Economic Impact: Remittances are a vital source of foreign exchange earnings for Nigeria and play a crucial role in supporting household incomes and overall economic stability. A decrease in remittances could lead to reduced foreign exchange reserves, affecting the country’s ability to finance imports and stabilize its currency.
- Policy Implications: The decline in remittances despite efforts by the CBN to attract foreign exchange highlights the challenges faced by policymakers in stimulating inflows. It suggests that current policies may not be effectively addressing the underlying issues affecting remittance flows, such as currency depreciation and economic uncertainty.
- Currency Weakness: The weakening of the local currency could be one of the factors contributing to the decline in remittances. When the domestic currency loses value, remittances in foreign currency may also decrease in value, affecting the purchasing power of recipients and discouraging further transfers.
- Global Factors: External factors such as economic conditions in host countries, particularly those with significant Nigerian diaspora populations, could also impact remittance flows. Economic downturns or policy changes in these countries may influence the ability or willingness of Nigerians abroad to send money home.
- Policy Response: The CBN may need to reassess its strategies for attracting foreign exchange and supporting remittance inflows. This could involve a combination of monetary policies, exchange rate management, and incentives to encourage diaspora remittances, such as reducing transaction costs or offering preferential exchange rates.
