Q1: Total Direct FX Remittances Declined by 6.28% YoY to $282.6m

Kayode Tokede

Despite efforts by the Central Bank of Nigeria (CBN) to attract foreign exchange into the country, total direct FX remittances dropped by 6.28 per cent Year-on-Year (YoY) to $282.6 million in the first quarter (Q1) ended March 31, 2024.

According to the Central Bank of Nigeria (CBN) “International Payments” data, total foreign exchange direct remittances in first quarter of 2023 was at $301.57million.

On a Month-on-Month (MoM) breakdown, the apex bank reported $138.56 million total direct remittances in January 2024, a growth of 75 per cent from $79.19million in January 2023, while in February 2024, it stood at $39.15million, a decline of 53.26 per cent from $83.76 million in February 2023.

In addition, total foreign exchange direct remittances was at $104.91million in March 2024, a further decline of 24.3 per cent from $138.63 million reported by apex bank March 2023.

While there have been concerns over the decline in total remittances to the country despite the surge in the number of Nigerians relocating abroad, the Vice President, Highcap Securities Limited, Mr. David Adnori said there may not be any cause for alarm now.

According to him, the decline in remittances in the Q1 2024 could be attributed to several factors including the weakening of the local currency, and policy directions of the CBN.

The CBN had reported a sum of $1.98billion total direct remittances in 2023, about 8.2 per cent from $2.16 billion in 2022. 

The CBN two months ago said overseas remittances into the country rose to $1.3 billion in February 2024 compared to $300 million in the preceding month.

However, the report by CBN disclosed $39.15 million total direct remittances in February 2024.

The Acting Director of Corporate Communications, CBN, Mrs. Hakama Sidi Ali recently noted a significant rise in foreign inflows in February 2024, driven by higher remittance payments from Nigerians living abroad and a spike in the purchase of naira assets by foreign portfolio investors.

Direct remittances come into the country via the International Money Transfer Operators, banks, among others.

There are four major sources of FX inflow into Nigeria. These include; proceeds from oil exports, proceeds from non-oil exports, Diaspora remittances, and foreign direct/portfolio investments.

In 2022, during the launch of ‘The RT200 FX Programme’ to boost foreign supply in the country through the non-oil sector in the next three to five years, the CBN had said that policies and measures Improved Diaspora inflow and remittances from an average of $6 million per week in December 2020 to an average of over $100 million per week by January 2022.

The report released in the fourth quarter of 2022 titled, “Remittances Brave Global Headwinds Special Focus: Climate Migration,” stated that it represents a 7.5 per cent rise from the prior year of 2021.

The report stated: “Nigeria, the largest recipient of remittances in the region, which witnessed a sharp recovery in flows during 2021 a 13.2 per cent, maintained the improved momentum of 2021 into to the first quarter of 2022. However, growth fell in Q2 data to 0.5 per cent vis-à-vis the same period of 2021. Moreover, the country is reaping little benefit from the surge in crude oil prices, while the expatriate community faces real income losses in the United States, the United Kingdom, and the Euro Area. A falloff in remittance flows to growth of 7.5 per cent is likely for 2022.”

Furthermore, the report noted that the remittance outlook cites that the risk of further adverse developments in the external environment will persist through 2023, “and act to lower the pace of remittance flows to Africa to 3.9 per cent. Price pressures for wheat, oil, and fertilizers are likely to continue into 2023, although ebbing from peaks of the previous year.

“Food affordability and deterioration of real incomes across African states will place a damper on economic growth, while government spending on subsidies and support for farmers will widen fiscal gaps. Little easing of current account deficits is seen given continuing adjustment to the large terms of trade changes of 2022. And depreciating currencies against the US dollar will magnify the rise in import prices measured in local currency.”

“Remittance outturns will depend on the balancing of increasing needs for support from the African overseas labor force, and the availability of incomes in host countries to be remitted. Real wages are now declining in the United States and the euro area, indicating the likelihood of softening remittance flows. For larger countries, Nigeria is anticipated to see continued moderation in flows to a 4.5 per cent pace in 2023. Kenya should experience a modest slowing to gains of 5.5 per cent,” the report stated.