By Chijioke Ohuocha | Reuters
Nigeria hopes to attract more remittances from its diaspora to boost foreign currency liquidity after the central bank issued a circular on Monday lifting rules that had restricted inflows.
Rising dollar demand has been putting pressure on the naira. Importers with obligations have scrambled for hard currency, while providers of foreign exchange, such as offshore investors, have exited after COVID-19 triggered an oil price crash.
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The bank said diaspora remittances would be paid in cash in U.S. dollars or into a domiciliary (foreign-currency) account at market rates. In the past, remittances could be paid in naira and the central bank had restricted domiciliary account usage.
In the circular, the bank sought to lure more remittances, a major source of dollar inflow after oil. The bank said the changes were needed to deepen the currency market and provide more liquidity.
Nigeria is the world’s fifth-biggest destination for international remittances, with 5 million Nigerians living abroad sending money back to relatives, according to Western Union. PricewaterhouseCoopers estimated that diaspora flows into Nigeria totalled $23.63 billion in 2018, representing 6.1% of GDP.
The naira hit 500 to the dollar on the black market on Monday to fall to a 3-1/2-year low as dollar scarcity worsened, widening the gap with the official market.
The central bank weakened the naira by 1.5% to 390 per dollar for exchange bureaux, closer to the over-the-counter spot market, quoted by investors and importers, to ease pressure on the currency.
(Reporting by Chijioke Ohuocha; Editing by Peter Cooney
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