The Nigerian foreign exchange market has continued to wallow in instability as the naira has lost almost 40 per cent in 18 months.
Specifically, between December 2014 and June 2016, the value of the naira depreciated by nearly 40 per cent at the Central Bank of Nigeria,CBN window from N165 to the dollar which it was, at the end of December 2014.
The depreciation at the parallel market has been more alarming. The gap between the official exchange rate and the parallel market has continued to widen beyond control.
The price of crude has been fluctuating, thus taking a toll on Nigeria’s revenue and foreign exchange reserve, which has so far declined by 18.6 per cent to $28.06 billion from the $34.46 billion it was at the beginning of 2015.
In an attempt to nip the problem in the bud, the CBN had embarked on measures to reduce the rate of foreign exchange outflow from the reserves.
One of the measures include the exemption of 41 items from the list of eligible items for foreign exchange, and closure of the retail Dutch Auction System (rDAS) in favour of an order-based system.
The apex bank has also reduced daily and annual limits on naira cards outside the shores of the country from $150,000 to $50,000 annually and $300 daily, and backed the move by banks to stop accepting foreign currency deposits as well as the recent ban on the usage of naira denominated cards abroad.
Asides this, it also reduced its weekly foreign exchange sales to BDCs from $30,000 to $10,000 and eventually stopped the sales out rightly early this year.
Economic experts have however suggested that the nation’s solution to the current foreign exchange shortfall is to find a way to supplement foreign exchange inflow through increased export earnings, foreign direct investments and Diaspora inflows.
Of all these three sources, Diaspora inflows appear the most readily available source the country can harness to solve the macro-economic challenges posed by foreign exchange shortfall.
In 2015, an estimated $21 billion flowed into the country, including $5.7 billion sent from the United States and about $3.7 billion from the United Kingdom. For 2016, the World Bank estimates that nearly $34 billion in remittances will flow into Sub-Saharan Africa from the more than 30 million Africans living outside their countries of origin.
Nearly two-thirds of this expected inflow in 2016, according to World Bank data, will come into Nigeria. Perhaps it is this huge significance of the money transfer sector to the nation’s economic life that informed the recent efforts by CBN to ostensibly clean the sector, Vanguard reports.
