In a strategic move to combat the diversion of diaspora remittances away from official channels, Bureau De Change (BDC) operators in Nigeria have forged a partnership with the Central Bank of Nigeria (CBN), working closely under the leadership of acting CBN Governor Folashodun Shonubi. This collaboration comes as concerns escalate over the detrimental effects of such remittance diversions on the Nigerian economy, particularly the destabilization of the foreign exchange market.
Shonubi, the acting CBN Governor, recently attributed the plummeting value of the naira against the dollar to the diversion of diaspora remittances. He highlighted the fact that a significant portion of these remittances, typically received in dollars, was bypassing the official documentation process and instead flowing into parallel markets, effectively evading regulatory scrutiny.
This alarming trend coincided with the naira hitting a historic low of N955/$1 in the parallel market, a situation aggravated by the scarcity of foreign exchange. However, there has been a slight reprieve as the naira now stands at N860/$1.
Aminu Gwadebe, President of the Association of Bureau De Change Operators of Nigeria (ABCON), shed light on the issue by revealing that a substantial portion of these diverted funds were finding their way into unofficial markets, often through unlicensed online platforms. Gwadebe elaborated, “It’s not in the official market, it’s not even in Nigeria, it’s not even coming… It’s being left abroad to be financing the 41 banned items and other illegal speculation holding activities.”
Gwadebe acknowledged that while some BDC operators were involved in these practices, not all were equally culpable. He praised the CBN’s efforts to sensitize operators and enhance transparency within the sector, highlighting that the central bank had instituted changes to reporting requirements for BDC activities.
Addressing the issue of diversions to unregulated fintech platforms, Gwadebe stated, “There are a lot of online platforms that are being advertised in all these places where we have Nigerians, and they are highly speculative. Sometimes their rates are even higher than what is obtainable in the parallel market.” He called for the creation of a level playing field, enabling licensed BDCs to compete effectively in the evolving financial landscape.
While the collaboration between BDC operators and the CBN seems to be a step in the right direction, some Nigerians are skeptical about the effectiveness of curbing remittance diversions. They argue that fintech platforms have become deeply ingrained and offer unmatched advantages in terms of ease of use and efficiency. Fintechs are praised for their borderless transactions, quick processing times, and user-friendly interfaces. These proponents emphasize that fintechs have become a preferred choice for many Nigerians due to their ability to seamlessly facilitate cross-border transactions. Therefore, they suggest that any strategy to address remittance diversion must acknowledge the enduring popularity and convenience of fintech platforms.
In a significant policy shift, the CBN has responded to these concerns by unveiling a series of operational adjustments for the BDC segment. The new framework reintroduces BDCs into the market, stipulating a spread on buying and selling rates that falls within a permissible range of -2.5% to +2.5% of the Nigerian Foreign Exchange market window’s weighted average rate from the previous day. Additionally, BDC operators are now mandated to submit periodic financial reports, a move designed to increase transparency and regulatory oversight.
As Nigeria grapples with the challenges posed by the diversion of diaspora remittances, the collaborative efforts between BDC operators and the CBN are poised to play a pivotal role in mitigating the impact of these diversions on the nation’s economy and foreign exchange stability. The partnership reflects a commitment to promoting financial transparency, enhancing market integrity, and ensuring that remittances contribute positively to the country’s economic growth. By aligning their strategies, the BDC operators and the CBN are taking a decisive step towards safeguarding the stability of Nigeria’s financial landscape.