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Dollar Crisis: FG Urged To Harness Foreign Remittances, Informal Markets

The federal government has been advised to fine tune how foreign remittances are being managed in order to save the naira which has been depreciating.

Some experts and traders who spoke to Daily Trust said apart from foreign remittances that are not captured in official quarters, multi-billion worth of transactions in US Dollar and the Pound Sterling, among others, are being carried out on daily business in informal markets in many parts of Nigeria.

They said if these transactions are captured in the banking sector, the naira will be salvaged and foreign exchange reserve strengthened.

On-going illegalities

It was learnt that Nigeria is not benefitting from the huge reserve of foreign currency within the economy due to the illegality that exists in the black market.

This is happening as Nigerians are facing one of the worst economic crises in years triggered by surging inflation, and the result of monetary policies that have pushed the currency to an all-time low against the dollar.

The naira has been in a downward spiral since June 2023, when President Bola Tinubu introduced a new foreign exchange regime in Africa’s largest economy.

Experts say domiciliary accounts make up more than a third of the deposits in the banking sector and a lot of it is not being used.

Nigeria’s foreign currency balances in commercial banks have become a topic of discussion in several quarters with some calling for a conversion of the “dormant” funds into naira to shore up the reserves.

Most recently, a former member of the House of Representative, Ibrahim Obanikoro (Eti-Osa Federal Constituency, Lagos State), called on the Central Bank of Nigeria (CBN) to close all domiciliary accounts for the next 12 months to ease the slide of the naira.

Obanikoro stated this in an online statement on Tuesday evening, where he said that he has come up with a bill that will serve the common good.

Foreign currency in circulation

According to Statista, in 2022, the personal remittances received in Nigeria increased by 0.7 billion U.S. dollars (+3.59 per cent) since 2021. In total, the personal remittances received amounted to 20.13 billion U.S. dollars in 2022.

The huge amount does not flow into the banking sector. The monies ended up in the local markets where they were stored as cash in private vaults.

The CBN last year attributed the free fall of the naira against the dollar to the diversion of diaspora remittances to the parallel market.

Folashodun Shonubi, the CBN acting governor, who spoke while delivering a lecture titled ‘Diaspora Remittances and Nigeria Economic Development’ at the National Institute for Security Studies in Abuja, said a lot of diaspora remittances arrived in Nigeria in dollars and end up in the parallel market without being officially documented.

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