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Nigeria’s Diaspora Remittance Inflows Drop to $3.3 Billion in Q2 2020

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US Dollar - Investorsking.com

COVID-19 Plunged Nigeria’s Foreign Remittance Inflows to $3.3 Billion in Q2 2020

Data from the Central Bank of Nigeria has shown that Nigeria’s remittance inflows hit the lowest since 2008 in the second quarter of the year as COVID-19 weighed on the income of Nigerians living abroad.

Nigerians in diaspora remitted $3.3 billion in the second quarter, down from the average of $5.8 billion per quarter normally remitted to the country.

Global lockdowns due to the COVID-19 pandemic impacted the income of many people in developed economies and this includes Nigerians in diaspora looking to remit money home for projects and families.

The report highlighted the likely struggle the new diaspora remittance policy of the apex bank may face in regards to forex scarcity.

ReadDespite New CBN Forex Policy, Naira Plunges Back to Record Low Against Global Counterparts(Opens in a new browser tab)

It should be recalled that the apex bank adjusted its remittance inflow policy to allow recipients to receive foreign remittance in foreign currency (US Dollar) in an effort to deepen forex liquidity and checkmate the activity of speculators and hoarders at the parallel market, popularly known as the Black Market.

Read – Polaris Bank Starts Paying Dollars to Recipients of Foreign Inflows

The apex bank had announced it was expecting $2 billion monthly or $24 billion annual remittance inflow to stimulate economic productivity and fast track recovery from the current economic recession.

However, with remittance hitting a record low of $3.3 billion in three months, the average monthly remittance is at about $1.1 billion. That is below $1.8 billion to $2 billion expected per month by the Central Bank of Nigeria to consistently prop up the value of the Nigerian Naira.

Read  – Nigeria’s Annual Remittance Inflow Estimated at $24 Billion -CBN

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

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Naira

Naira Gained 0.08 Percent to N414.73 Against the United States Dollar on Monday

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Naira - Investors King

The Nigerian Naira gained against the United States Dollar on Monday after falling to a record low of N422 per US dollar on Friday at the official forex window.

The local currency opened at N414.46 to a United States Dollar, a 0.15 percent improvement from Friday’s closing price.

Naira dropped as low as N425 to a United States Dollar at the spot forex market and to N429.50 at the forward forex market before closing at N414.73 to a United States Dollar at the spot forex market. Forex traders traded $172 million at the official forex window on Monday.

Forex scarcity across key foreign exchange segments and the decision of the central bank of Nigeria to halt the sale of forex to Bureau de Change operators continue to impede forex access in Africa’s largest economy.

Vice President Osinbajo had suggested that the apex bank should look to adopt a new forex policy to better close the gap between the black market and official rates. At the unregulated black market, traders are selling at N570 to US dollar.

This, the Vice President said was what was sustaining the black market.

For context, the Vice President’s point was that currently the Naira exchange rate benefits only those who are able to obtain the dollar at N410, some of who simply turn round and sell to the parallel market at N570. It is stopping this huge arbitrage of over N160 per dollar that the Vice President was talking about. Such a massive difference discourages doing proper business, when selling the dollar can bring in 40% profit!, stated Laolu Akande, Senior Special Assistant to the President on Media & Publicity, Office of the Vice President.

“This was why the Vice President called for measures that would increase the supply of foreign exchange in the market rather than simply managing demand, which opens up irresistible opportunities for arbitrage and corruption.”

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Naira

Naira Plunges to Record Low of N422/US$1 at Official Market

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Naira Dollar Exchange Rate - Investors King

The Nigerian Naira extended its decline to N422 to a United States Dollar at the official forex market, the investors and exporters forex window managed by the FMDQ Group.

Naira opened the day at N413.50 to a US Dollar before plunging to as low as N436 at the spot forex market and N446 at the forward market. The local currency eventually closed the day at N422.07 per US Dollar.

Investors at the window traded $141.94 million during the trading hours of Thursday.

The decline was after Vice President Osinbajo asked the Central Bank of Nigeria (CBN) to rethink its current forex policy and allow the Naira to reflect market conditions. This, the Vice President said will help close the current gap that exists between the official rate and black market rate.

Media outlets had interpreted the Vice President position as a call for further devaluation of the Nigerian Naira. However, in a statement signed by Laolu Akande, Senior Special Assistant to the President on Media & Publicity, Office of the Vice President, Akande explained that Osinbajo is simply calling for a single forex rate to dislodge the activities of speculators and hoarders at the various unregulated black market.

He added that the 40 percent or N160 arbitrage difference between the official rate of N410 and N570 offered at the black market will continue to encourage corruption in the forex market.

“For context, the Vice President’s point was that currently the Naira exchange rate benefits only those who are able to obtain the dollar at N410, some of who simply turn round and sell to the parallel market at N570. It is stopping this huge arbitrage of over N160 per dollar that the Vice President was talking about. Such a massive difference discourages doing proper business, when selling the dollar can bring in 40% profit!

“This was why the Vice President called for measures that would increase the supply of foreign exchange in the market rather than simply managing demand, which opens up irresistible opportunities for arbitrage and corruption.”

At the black market, traders exchanged Naira at N565 to a United States Dollar on Thursday.

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Naira

Osinbajo Explains Why Forex Policy Should Discourage Arbitrage and Corruption

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Naira Exchange Rates - Investors King

Following Vice President Yemi Osinbajo suggestions that the Central Bank of Nigeria (CBN) should rethink its present forex policy that encourages arbitrage and corruption and allow the Nigerian Naira to reflect market realities that were misconstrued as devaluation by the media, the Vice President has now come out to clear the air that he is not calling for a devaluation of the embattled Naira but to close the arbitrage gap of 40 percent gain that existed between CBN rate of N410/US$1 and the black market rate of N570.

In a statement released by Laolu Akande, Senior Special Assistant to the President on Media & Publicity, Office of the Vice President, the Vice President position was that the current Naira exchange rate benefits only those who are able to access the US Dollar at N410, “some of who simply turn round and sell to the parallel market at N570. It is stopping this huge arbitrage of over N160 per dollar that the Vice President was talking about. Such a massive difference discourages doing proper business, when selling the dollar can bring in 40% profit!,” the statement reads.

It continues “This was why the Vice President called for measures that would increase the supply of foreign exchange in the market rather than simply managing demand, which opens up irresistible opportunities for arbitrage and corruption.

“It is a well known fact that foreign investors and exporters have been complaining that they could not bring foreign exchange in at N410 and then have to purchase foreign exchange in the parallel market at N570 to meet their various needs on account of unavailability of foreign exchange. Only a more market reflective exchange rate would ameliorate this. With an increase in the supply of dollars the rates will drop and the value of the Naira will improve.

“The real issue confronting the economy on this matter is how to improve the supply of foreign exchange, but this will not happen if we do not allow mechanisms like the Importers and Exporters window to work. If we allow this market mechanism to work as intended, we will find that the Naira will appreciate against the dollar as we restore confidence in the system.”

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