Nigeria received $4.2 billion in foreign remittances in the first quarter of 2021, according to data obtained from the central bank’s balance of payments data published on its website.
Employee remittances, as the central bank’s data puts it, shows that the amount of dollars sent through the banking system by Nigerians living in the diaspora has fallen by 24% compared to the $5.6 billion spent in the same period last year was reported. Nigeria relies heavily on remittances from the diaspora to bolster its balance of payments obligations. In 2020, Nigeria reported about $16.9 billion in employee remittances, compared to $23.4 billion in 2019.
The central bank reports two remittance data, employee remittances and remittances. The workers’ remittances include cash and other non-cash items and do not represent actual money imported by Nigerians from the diaspora. However, it is an honest representation and gauge of the forex influx of Nigerians living abroad.
In 2020, total home remittances captured in central bank currency flows, which largely represent cash inflows, were about $1.2 billion, compared to $3.2 billion in 2019. It was $1.7. billion in 2018.
The global Covid-19 pandemic has had an impact on Western economies over the past year, leading to trillions of dollars in stimulus packages in Europe and the United States for citizens, including Nigerians who also hold foreign passports. This has impacted the effectiveness of the diaspora influx, as more Nigerians there prioritize survival over sending money home.
However, a more plausible cause of the year-on-year decline in diaspora remittances is Nigeria’s foreign exchange policy, which left diaspora Nigerians with little choice but to transfer money through black market channels. Some also rely on cryptocurrency-backed peer-to-peer transfer mechanisms, which can also underestimate the actual remittances sent home.
In March, the Central Bank of Nigeria launched its naira-4 dollar scheme which provided a reward of N5 for every dollar transferred through the banking system. The policy aimed to bolster forex liquidity in the financial system with the expectation that it would crash black market rates. However, the exchange rate continues to depreciate uncontrollably, reaching an all-time high of N530/$1 late last week.
The top bank has yet to release data regarding foreign exchange remittances for the second quarter of 2021 and has yet to provide details on the success of its naira 4 dollar scheme. Nigeria’s foreign reserves totaled $34 billion in August 2021 as oil revenues and capital imports fail to increase inventories. The exchange rate difference between the black market and the official market was over N120 last week.