Since the introduction of the Central bank of Nigeria’s (CBN) “Naira4Dollar Scheme” in March 2021, the Naira rate has fallen by a whopping N127 (or 26%).
Specifically, the parallel market rate of N612/$1 as of Monday, 4th of July, 2022, compares to N485/$1 prior to the launch of the “Naira4Dollar Scheme”.
- This reflects a N127 reduction or 26% depreciation to the value of the Naira on the parallel market since the scheme was implemented.
Naira4Dollar: The CBN launched the “Naira 4 Dollar Scheme” on March 8, 2021, to incentivize the inflow of remittances from the diaspora into the country, in response to the inadequate forex supply and ongoing pressure on the country’s exchange rate.
The key requirement for this Naira4Dollar program to function was that remittances from the diaspora had to be sent via an authorized international money transfer operator (IMTO).MM
- Thus, if you received a diaspora remittance of $20,000 (Twenty Thousand Dollars) CBN would simply credit your Naira account with an additional N100,000 (N5 x 20,000).
- Originally set to end in May 2021, this Naira4Dollar initiative was extended indefinitely.
Just in case anyone was interested in how this initiative was faring, the CBN released an update in February 2022, stating that diaspora remittances surged to $100 million weekly from $6 million (i.e. a 1,667% surge).
From the Central Bank of Nigeria’s perspective, the Naira4Dollar initiative has successfully provided an opportunity to encourage alternative FX inflows from non-oil sources.
However, from the perspective of an average Nigerian, it may be unclear how to acknowledge that this initiative has been successful. This is because the challenges of accessing foreign exchange persist.
Specifically, anecdotal data suggests that businesses continue to experience latency in getting backlogs of FX orders fulfilled. These anecdotal experiences can arguably be evidenced by notifications from key operators such as
- In February 2022, Nigerian Banks sent out a plethora of communication advising customers of reduced dollar limits on debit cards
- In May 2022, IATA published information suggesting that Nigeria was owing airline operators a backlog of over $450 million.
- When the Naira4Dollar scheme was introduced in March 2021 (i.e. fifteen months ago), the CBN had suggested that a huge portion of the diaspora remittances would be incentivized to use the Naira4Dollar initiative rather than going through non-official channels.