CBN’s “Naira4Dollar Scheme” falls beyond expectations
The "Naira4Dollar
Scheme" of the Central Bank of Nigeria (CBN) was launched in March 2021,
and since then, the rate of the naira has dropped by a
staggering N127 (or 26 percent).
On Monday, July 4,
2022, the parallel market rate was N612/$1, compared to N485/$1 before the
"Naira4Dollar Scheme" was introduced.
This is a N127 decrease
or a 26 percent depreciation in the value of the Naira since the plan was put
into place.
On March 8, 2021, the
CBN introduced the Scheme to encourage the entry of remittances into the nation
in reaction to the insufficient forex supply and continuous strain on
Nigeria's exchange rate.
The Naira4Dollar
project was supposed to give the Central Bank of Nigeria the chance to promote
alternative FX inflows from non-oil sectors.
The scheme, according
to the CBN, would award a N5 bonus to any Nigerian living abroad who sends a
dollar through an international remittance company.
The bank maintains that
the N5 giveaway is more than justified in the grand scheme of things because of
the reaping from remittances, which it anticipated would exceed one
or two billion dollars each month. Additionally, it believes that the incentive
will lessen round-trips.
The bank did not
specify how much it would spend on the promotion in the two months following
its introduction, but according to two sources, it might be in the tens of
millions of naira, based on how well it is received by the general public.
The bank made the
case that the bonus is insignificant in light of the potential inflows from
remittances, which are currently expected to be worth $23 billion annually and
to reach $34.89 billion in two years by PricewaterhouseCoopers.
However, it can be
difficult for the typical Nigerian to understand how to recognize the
effectiveness of this program. This is due to the ongoing difficulties in
obtaining foreign currency.
Particularly, research
shows that businesses still encounter delays in fulfilling long delays of FX
orders. These firsthand experiences may be supported by notices from important
operators. For example, Nigerian banks sent out a flurry of communications
in February 2022 informing clients of decreased dollar limitations on debit
cards.
According to statistics
IATA revealed in May 2022, Nigeria owed airline operators a backlog of nearly
$450 million.
The CBN had proposed
that a significant share of the diaspora remittances will be encouraged to use
the Naira4Dollar scheme rather than traveling through unofficial methods when
the Naira4Dollar plan was first announced fifteen months ago.
Ideally, the goal was
to consolidate the $20 billion in annual remittances from the diaspora.
Centralized FX inflows would consequently have a positive effect on the value
of the Naira and mitigate its devaluation.
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