Forex

Diaspora Remittance: Understanding ‘CBN Naira 4 Dollar’ Policy

Published

3 years ago

March 10, 2021

The new “Naira 4 Dollar” initiative was introduced because of the failure of the diaspora remittance policy announced in November 2020, when the apex bank adjusted its diaspora remittance policy to checkmate dollar-bank-transfer being carried out between diaspora remittance recipients and forex buyers.

The strategy then was to receive remittance in a domiciliary account and transfer it to operators in the parallel market or whoever was in need of it at a black market rate, and since withdrawing means you will be paid the equivalent in Naira at a bank rate of N362/$ before it was adjusted to N391/$, several diaspora remittance recipients stopped withdrawing their remittance inflow but transfer to forex dealer’ accounts.

The fact that people were not withdrawing means the dollars were not entering the economy, hence the forex scarcity that plunged Naira to N484 as of today on the black market.

In order to curb the situation, the CBN quickly adjusted its policy to allow people to receive their diaspora remittances in dollars with the hope – the estimated $21 billion per year inflow – would help stimulate productivity and fast track economic recovery.

However, the lockdown caused by COVID-19 is a global occurrence. Many Nigerians in the diaspora were unable to work and were only managing stimulus cheques if they were lucky enough to reside in US, Canada, Australia, Ireland, etc.

For the majority, they have to shut down their businesses and went into a survival mode. Therefore, the CBN strategy to flood the economy with diaspora remittances failed.

In a desperate move to lure them into the economy, especially sensing the nation could plunge back into recession due to weak crude oil production of 1.4 million barrels per day (below 2.2mbpd capacity), falling foreign reserves of $35 billion, weak revenue generation, high unemployment and escalating inflation rate, the apex bank was forced to launch Naira 4 Dollar initiative.

This is because Nigeria is an import-dependent/petrol-dollar economy, meaning it needs to sell crude oil to generate dollars and use the dollar to service its economy, import for consumption.

Here are what could happen if the strategy works

The economy will come alive as diaspora remittance is estimated at about $21 billion per year, it will augment the nation’s dwindling foreign reserves.
Economic productivity will improve and so will GDP growth
New job creation will surge and spending will improve
Internal revenue generation will improve due to import duty, VAT and other charges
Import-dependent businesses will come alive as they will have access to more dollars in a p2p kinda transaction.

Here is why the strategy may not really work

There is a partial lockdown in most developed nations where Nigeria remits the most.

While the central bank thinks it could lure Nigerians in the diaspora with N5 per US Dollar strategy, the plunge in Naira to N483/US Dollar, N675 to a British Pound and N580 to a Euro is enough to encourage, lure and attract anyone that has the money to send to do so. N5/US$ gift won’t make a huge difference if they don’t have it, to begin with. However, it could create a loophole for certain individuals to exploit the system.

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Samed Olukoya

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Businessinsider, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

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Forex

BDC Operators in Abuja Face EFCC Crackdown: Chaos Erupts in Wuse Zone 4

Published

2 days ago

April 30, 2024

Samed Olukoya

The bustling streets of Wuse Zone 4 in Abuja transformed into a scene of chaos and apprehension as the Economic and Financial Crimes Commission (EFCC) conducted a surprise crackdown on Bureau De Change (BDC) operators.

The operation, which unfolded on Monday, sent shockwaves through the financial district, leaving traders and residents bewildered.

Eyewitnesses recounted scenes of pandemonium as EFCC agents descended upon the area, swiftly apprehending an undisclosed number of BDC operators.

The raid, which occurred around noon, disrupted normal trading activities and prompted fear among the local populace.

Speaking on condition of anonymity, BDC operators confirmed the raid, expressing dismay at the sudden turn of events.

“EFCC just raided the market, arresting many operators. They arrested some persons seen on the street and even pursued some persons to their offices. We are still looking for N30,000 or N50,000 to bail those arrested on Friday yet they came again today,” one trader lamented.

The crackdown comes as part of the EFCC’s concerted efforts to combat illicit financial activities and restore stability to the foreign exchange market.

Last Friday, the anti-graft agency announced the arrest of 34 suspected currency speculators for alleged involvement in foreign exchange fraud, signaling a firm stance against financial malpractice.

However, the EFCC’s actions have stirred controversy, with some questioning the efficacy of such raids in addressing underlying issues affecting the Nigerian currency.

Despite these efforts, the naira opened the week on a negative trajectory against the United States dollar, signaling potential challenges ahead.

At the official market on Monday, the naira witnessed a significant depreciation, trading at N1,419 against the dollar, representing a loss of N58 or 4.3% from the previous trading session.

The decline underscores the persistent demand for the greenback amid economic uncertainties.

Currency traders at the Zone 4 market reported heightened volatility, with the dollar trading at N1,340 per dollar, marking a notable increase from the weekend rate.

Amidst the turmoil, traders like Abubakar Taura navigated the fluctuating market, capitalizing on the volatility to secure profits.

Naira

Dollar to Naira Black Market Today, April 30th, 2024

As of April 30th, 2024, the exchange rate for the US dollar to the Nigerian Naira stands at 1 USD to 1,340 NGN in the black market, also referred to as the parallel market or Aboki fx.

Published

2 days ago

April 30, 2024

Samed Olukoya

As of April 30th, 2024, the exchange rate for the US dollar to the Nigerian Naira stands at 1 USD to 1,340 NGN in the black market, also referred to as the parallel market or Aboki fx.

For those engaging in currency transactions in the Lagos Parallel Market (Black Market), buyers purchase a dollar for N1,310 and sell it at N1,300 on Monday, April 29th, 2024 based on information from Bureau De Change (BDC).

Meaning, the Naira exchange rate declined when compared to today’s rate below.

This black market rate signifies the value at which individuals can trade their dollars for Naira outside the official or regulated exchange channels.

Investors and participants closely monitor these parallel market rates for a more immediate reflection of currency dynamics.

How Much is Dollar to Naira Today in the Black Market?

Kindly be aware that the Central Bank of Nigeria (CBN) does not acknowledge the existence of the parallel market, commonly referred to as the black market.

The CBN has advised individuals seeking to participate in Forex transactions to utilize official banking channels.

Black Market Dollar to Naira Exchange Rate

Buying Rate: N1,340
Selling Rate: N1,330

Forex

ABCON President Announces Blueprint for Unified Retail Forex Market

Published

3 days ago

April 29, 2024

Samed Olukoya

Naira Dollar Exchange Rate - Investors King

The President of the Association of Bureaux De Change Operators of Nigeria (ABCON), Aminu Gwadabe, has revealed plans to establish a unified retail end forex market structure.

This strategic initiative seeks to address volatility and streamline operations across the Bureaux De Change (BDC) sub-sector.

Gwadabe outlined the objectives of ABCON’s blueprint and the need to integrate operators from various segments of the market.

Central to the plan is the inauguration of state chapters to facilitate coordination, integration, and administration of a united market structure.

ABCON intends to extend its automation policies and platforms to all BDC operators nationwide, upgrading its Business Process Platform to enhance efficiency and transparency.

The proposed unified retail end forex market will feature a centralized, democratized, and liberalized online real-time trading platform.

This innovation aims to provide market participants with greater accessibility and transparency while fostering regulatory compliance and government oversight.

Speaking on the vision for the unified market, Gwadabe highlighted the importance of collaboration with regulatory agencies, security operatives, and government bodies to ensure a secure and thriving forex market environment.

Gwadabe reiterated the benefits of a realistic and vibrant retail forex market, aligning with the Central Bank of Nigeria’s (CBN) objectives of achieving true price discovery for the naira and balancing international obligations.

Also, the unified market structure aims to provide market intelligence reports, enhance the image of BDCs, and stimulate employment generation.

Furthermore, ABCON’s initiative aims to combat the proliferation of unlicensed forex platforms by creating a transparent and competitive market environment. By digitizing retail forex transactions and ensuring regulatory compliance, the association aims to capture revenues for the government and curb illicit financial activities.

ABCON, as a self-regulatory body representing all CBN-licensed BDCs, acknowledges the importance of maintaining integrity and adherence to regulatory standards within the sector.