Nigerian banks to start disbursing foreign currency under new diaspora remittance rules

ABUJA, December 3 (Reuters)Nigerian banks will begin disbursing dollars for diaspora inflows on Friday and shut down naira transfer accounts after the regulator relaxed money transfer rules in an attempt to increase forex liquidity in the country, the central bank announced Thursday.

Rising demand for dollars is putting pressure on the naira. Importers with bonds rushed to seek hard currencies, while currency providers, such as foreign investors, pulled out after COVID-19 triggered a collapse in oil prices.

Nigeria is hoping it can attract more remittances from its diaspora after the central bank lifted restrictions that have hampered inbound flows on Monday.

He said the changes would help reduce arbitrage through which money transfer operators take advantage of unofficial channels.

The naira has weakened sharply on the black market since last month. On Monday, it traded at a 3.5-year low of 500 naira to the dollar, widening the premium between the official market where the currency has been stuck at 381 since July.

The central bank said it met with commercial banks and money transfer operators on Thursday to discuss the changes, which could help boost Nigeria’s balance of payments and reduce its dependence on foreign borrowing.

Under the new rule, remittances from the diaspora would be paid in cash in US dollars or to a domiciliary account (in foreign currency) at market rates. In the past, remittances were paid in naira and the bank restricted the use of the home account.

Nigeria is the fifth largest destination in the world for international remittances, with 5 million Nigerians living abroad returning money to loved ones, according to Western Union.

PricewaterhouseCoopers estimated that diaspora flows to Nigeria totaled $ 23.63 billion in 2018, or 6.1% of GDP.

(Reporting by Felix Onuah and Chijioke Ohuocha; editing by David Gregorio)

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