I’ll be the first to say it’s about time.
The days of waiting on manna (aka dollars) from abroad only for your local bank to run out of $50 bills need to be buried like a bad dream. Good thing the Central Bank of Nigeria (CBN) also agrees. I applaud the CBN for doing a U-turn on restricting remittance companies from paying beneficiaries in local currency, a policy introduced in late 2020.
For a nation of 133 million multi-dimensionally poor, Nigeria has no business with policies that scare off operators that offer cash-strapped Nigerians a way to receive timely help from relatives abroad. In this article, I’ll review the motivations behind CBN’s local currency restrictions, its impact on different stakeholders and what consumers and businesses can expect going forward.
Good intentions, ugly outcomes
Let's start with why the CBN introduced the 2020 restrictions in the first place.
Under Godwin Emefiele's tenure, the CBN pulled different stunts to tame Nigeria's growing FX supply problem. Each new FX policy went after a new scapegoat. With the 43 FX-restricted items, products like rice and toothpicks became the bad guys. Again in 2021, Bureaux de Change (BDC) shops were the culprits. Even abokiFX (a popular website that published black market FX rates) got caught under Emefiele's knife.
The local currency restriction introduced in 2020 was yet another one. And the new scapegoat? Nigeria's unofficial FX flows—the foreign remittances coming into Nigeria through informal channels and sidestepping formal channels (i.e. banks).