The uncertainty that thrives in Nigeria’s foreign exchange market is partly to blame for the massive fall in the cross-border remittances that flow into the country, an official of the International Monetary Fund (IMF) said.
According to Punch, a local news outlet in the country, Abebe Selassie, the official, said that in response to a question presented to him during a meeting with a virtual press.
Mr Selassie Started by admitting that the effect of the Covid-19 pandemic had affected the cross-border remittances globally. He then added that the distrust over Nigeria’s exchange rate equally contributed to the 28% drop in the flow of remittances into Nigeria.
“A second factor, I think, is the uncertainty in the foreign exchange market that has prevailed in Nigeria over the last year. I don’t think that it has been very conducive to remittances flowing as much as they were before, this has been captured by the official financial sector,” Selassie quoted saying.
According to a previous report, Nigeria’s insistence on using an overestimated exchange rate had compelled the country’s expatriate Organisation to avoid the official remittance channel.
The use of this overvalued estimate is also believed to have contributed to the surge in the use of cryptocurrency and other options for remittances.
Although the Central Bank of Nigeria (CBN) has since tried to regain the lost remittances through the avenue of the “naira for dollar” initiative, the IMF official affirms that inflows will only increase once the forex exchange is restored.
As long as the country reforms its foreign exchange market and works through the process of ensuring that there is only a single and unified foreign exchange market rate, the uncertainty and confidence will return which will allow more remittances to flow and be captured by the financial sector.
The reforms will guarantee an increase in the level of remittances sent through formal channels, he concluded.
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