Nigerians Abroad Send Home Lowest Remittance in Three Years Amid FX Scarcity

Amid persistent foreign exchange (FX) scarcity and sluggish economic growth in high-income economies, Nigerians living abroad have sent home the lowest amount of remittances in nearly three years, according to the latest quarterly report from the Central Bank of Nigeria (CBN).

In the third quarter of last year, remittances inflow through official channels dwindled to $4.58 billion from $4.95 billion in the previous quarter.

This decline, representing a 4.6 percent drop from $4.8 billion in Q3 of 2022, exacerbates FX liquidity challenges in Africa’s largest economy.

The World Bank’s Migration and Development report highlighted the Nigerian Central Bank’s interventions in the FX market as a factor contributing to an increasing gap between the official and parallel exchange rates until the FX liberalization program commenced in June 2023.

Despite this initiative, the disparity persisted, prompting a resurgence of the parallel market premium.

Folashodun Shonubi, former acting governor of the CBN, voiced concerns over undocumented remittances arriving in the country, mostly in dollars, and flowing into unregulated black markets, potentially fueling illicit activities.

The CBN’s recent policy measures aimed at stabilizing the FX market include mandating deposit money banks to manage their foreign currency assets and liabilities and removing the allowable limit of exchange rates quoted by International Money Transfer Operators.

The sustained depreciation of the naira against the dollar continues to incentivize remitters as the reduced value of remittance translates to lower dollar outflows.

However, this exacerbates FX liquidity constraints and underscores the need for sustainable FX management strategies to mitigate adverse effects on the economy.