Nigeria is considering launching a “diaspora bond” in the U.S. next year to capture some of the significant remittance inflows from Nigerians living abroad, which the Central Bank hopes could bring in $1 billion monthly.
This idea was shared by Central Bank Governor Olayemi Cardoso during the IMF and World Bank meetings in Washington, D.C. This bond aims to engage the substantial Nigerian diaspora in the U.S., who have shown increased interest in investing in Nigeria since recent government reforms.
Cardoso observed that Nigerians abroad are interested in investing in their home country beyond just financial contributions. Recent reforms have doubled remittances from the diaspora. Additionally, the devaluation of the naira has made local assets more attractive to Nigerians living overseas, providing an incentive for investment in domestic assets.
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Cardoso expressed optimism that current reforms are bent on restoring investor confidence. Despite significant currency depreciation and rising fuel prices, monthly remittances grew from $250M to $600M by September, with the goal of reaching $1B monthly by next year. Cardoso is hopeful about meeting this target.
Nigeria’s foreign reserves have surpassed $40B, and Cardoso suggests that the depreciated naira could help the country diversify its economy beyond oil dependency. The weaker naira might encourage importers to focus more on domestic production, reducing Nigeria’s reliance on imports and enhancing local productivity.
In his words, “Now that our currency is relatively competitive, there should be opportunities for those who have relied heavily on imports to enhance productive activities that have long eluded us.”
Final Thoughts
If the Central Bank continues on its current path, building confidence through consistency and ongoing reforms, the diaspora bond could indeed be a pivotal tool in Nigeria’s economic diversification efforts and a testament to the impact of well-targeted fiscal policy.
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