DR. OMOLARA OMOTUNDE DUKE

DR. OMOLARA OMOTUNDE DUKE

DEPUTY DIRECTOR, CENTRAL BANK OF NIGERIA

Dr. Omolara Omotunde Duke is an executive staff with the Central Bank of Nigeria and currently a Deputy Director and Head of the Monetary Policy Committee Secretariat of the Bank. She has 33 years of work experience that span across, research, monetary policy and international economics.

She was a member of the National Committee that along with the International Organization on Migration, designed the National Labour Policy for Nigerian. She has BSc Degree from the University of Ibadan, MBA in Finance from the University of Lagos, Akoka, Master’s degree in Economics from ESUT Business Scholl and a Ph.D. in Economics from the University of Nigeria.

THE INFLOW AND OUTLOOK OF INTERNATIONAL REMITTANCES IN NIGERIA.

Nigeria has remained the leading recipient country of remittances in sub-Sahara Africa and amongst the top 10 recipient countries globally. The World Bank (2022) estimated remittance inflow into Nigeria in 2022 at US$20.9 billion which shows a higher-than-expected recovery from US$19.2 billion in 2021 after the impact of COVID-19 pandemic in 2020 when aggregate inflow was US$17.12 billion.

Remittances inflow into Nigeria is channeled majorly through international money transfer organisation (IMTOs). CBN (2019) estimated that total remittance inflow through IMTOs accounts for 67.2% of total in Nigeria an environment where there is still an appreciable proportion of inflow through informal sources. This implies that the aggregate inflow through the formal channel can be higher if the use of informal channels declines. Despite the huge inflow, remittances has not translated directly to economic development because it is used more as a social safety net and largely consumed rather than used for economic activities.

Increasingly there has been substantive growth of social remittances, particularly from the Nigerian Physicians in the Diaspora during their annual medical missions to Nigeria. They provide medical services of high net value which in monetary terms could push up aggregate volume of remittance inflow. Remittance Stakeholder Institutions in the value chain in Nigeria include International Money Transfer Organisations; Central Bank of Nigeria that provide the regulatory framework and licensing of IMTOs; and domestic banks that are agents to the IMTOs, they disburse remitted funds in cash to recipients and also cross sell investment, financial and mortgage products to the recipients where available. The Debt Management Office (DMO) is responsible for debt issuance and it issued the highly successful first and only diaspora bonds so far floated by Nigeria. The 5-year US$300 million Diaspora bond which was issued on June 27, 2017 was fully redeemed in 2022.

The factors driving the growth of remittance inflow include the improvement in cross-border payments, increase in financial products for the diaspora and the payment of remittances in foreign currency largely facilitated by the central bank’s Naira for dollar Scheme where N5 is paid as an incentive for every US$1 received by recipients.

Despite the high inflow of remittances, there are still challenges that should be addressed to further improve remittance inflow. These include weak economic performance, insecurity challenges, and low financial inclusion in the less urban areas.

Others are weak data to support informed policies and high cost of transfers of up to 12% to Sub-Sahara Africa which promotes the use of informal channels.

In addition, the fact that remittances are largely consumed and used for social safety nets imply that the developmental impact of remittances has remained weak.The inflows of cash, social and in-kind remittances are largely driven by private initiatives that should be supported more by government to increase nationwide reach and ease of remittance delivery.

The narratives above evaluates the remittance environment in Nigeria, which is still faced with macroeconomic challenges which have persisted since 2019 although had declined in recent years. Overall, reforms and new initiatives are required to improve the remittance environment. One of which is the management of cross-border migration. An important objective of this would be to provide pre-migration education to migrants particularly on the channels of remitting funds back home. In addition, licensing cross-border labour management firms to facilitate employment of skilled and semi-skilled migrant workers to labour deficit countries would promote a reduction in unemployment and promote the increase the inflow of remittances into Nigeria.

Nigeria launched the Central Bank digital currency, e-Naira on October 25, 2021, and it is expected to provide landmark catalyst for remittances transfer into Nigeria when its cross-border payment features becomes operational. The success of the e-Naira as a conduit for remittance inflow would however be contingent upon its interoperability, rules and guidelines of the send countries (Bank of International Settlement, 2022).

The adoption of eNaira for remittances would significantly reduce the cost of remittance transfers to Nigeria, a corridor which has one of the highest charges globally of about 7.5% of the total amount remitted (The World Bank , 2022). An upcoming feature of the e-Naira platform is the use of the USSD code without internet facility. This implies that it can be used in the rural areas with low financial inclusion. In addition, the number of active mobile lines in Nigeria stands at 214.4 million in October 2022, and a tele density 112.47 (Nigerian Communications Commission, 2022). This will support wide access to the e-Naira platform using mobile telephones and increase activities along the remittance value chain. Furthermore, Fintech companies should be encouraged to bridge the high cost of remittance transfer through the development of cheaper payment channels.

A huge cross-border migration trend has been observed in Nigeria in the last two years, where highly skilled labour are migrating to the developed countries.

Although there is the growing concern of brain drain, it is expected that the volume of the remittances that would be sent by these first-generation migrants would be a compensating factor.

The articulation and implementation of initiatives as described above would increase the adoption of formal channels. The expected increase in inflow would also be a function of improved data capture that would support policy formulation, increase the multiplier effects of high remittance inflow and ultimately contribute to economic development in Nigeria.