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IMF Blames Forex Crisis For Drop In Nigeria’s Remittance Flows

Oluwsina Phillip

The International Monetary Fund has said that the uncertainty in Nigeria’s foreign exchange market contributed to the decline in diaspora remittance flows into the country.

The Director, African Department, IMF, Abebe Selassie, said this while responding to a question during the virtual IMF October 2021 Annual Meeting’s press conference on the ‘Regional Economic Outlook’ report for sub-Saharan Africa.

When asked why the country’s remittance flows dropped by 28 per cent in 2020, Selassie blamed the development on two major factors.

He said, “I think all remittances have declined. I would argue two factors. I mean one, of course, is the economic conditions, particularly last year and through the earlier part of this year, especially in many of the advanced countries and other countries where expatriate Nigerians are and send money back have not been very good. So, it is not surprising that remittances might have dropped.

“So, that’s one factor; but a second factor, I think, is the uncertainty in the foreign exchange market that has prevailed in Nigeria over the last year. I don’t think that it has been very conducive to remittances flowing as much as they were before or, indeed, being captured by the official financial sector.”

Selassie added, “So, I think that has been a second factor. Going forward, as long as the reforms on the foreign exchange market that are required to try and make sure that the country moves through having a single, unified foreign exchange market can take place, then this will help reduce uncertainty and it will increase confidence and allow more remittances to flow and be captured by the financial sector.

“I think that’s going to be a very important contributor. And so, the extent to which remittances we see being recorded increases will partly depend on this as well.”

The IMF position came just as the Governor of the Central Bank of Nigeria, Godwin Emefiele, blamed medical tourism for the country’s foreign reserves challenge.

Emefiele said that the CBN and other banks would support the healthcare sector to reverse the trend.

He said, “Medical tourism put a huge strain on our foreign reserves, and more importantly, for every $1bn allocated to medical treatment abroad, there is less than $1bn that could be available to other critical sectors of our economy.

“As part of this effort, the CBN and select private sector stakeholders supported COVID-19 intervention initiatives through CACOVID.”

To further drive the recovery of the economy, the CBN Governor stated that the monetary policy recognised that while the interventions in the manufacturing sector were essential, it was also important to continue to give support to the medical sector.

“When we started COVID-19 intervention initiatives, the CBN set aside N100bn to support the healthcare sector, but upon the rise in demand, we have disbursed N107.7bn, supporting 114 healthcare projects which include medical diagnostics, pharmaceuticals, dental services, eye clinics both private and public hospital – just to mention a few,” Emefiele said.

He encouraged banks to lend and the private sector to also invest in the country.

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