How CBN policy under Tinubu is facilitating money laundering and shortchanging money sent by diaspora
By Emmanuel Ogebe
Also in my Diaspora Day 2023 letter to NIDCOM, I raised concerns thus:
“Suspension of forex delivery
As stated in my prior letter, “Diaspora remittances are the sole saving grace of the naira now which would have crashed to over N1000 to the dollar. It is ironic that while the political kleptocrats single-handedly destroyed the naira through their delegates dollar-bribing spree, it is hardworking Diasporans who continue to shore up the naira in a forex depleted economy.
At a time when NNPC has failed to remit forex to the government, thus exacerbating the forex shortage, Diasporans continue to inject forex into the economy.
At a time of massive investor disinvestment and capital flight, the Diaspora remains a committed investor in Nigeria. In 2021, Nigeria’s foreign direct investment (FDI) was merely about USD4.8 billion while home remittances by the diaspora was estimated at just over USD 20 billion. This means that remittances were about 4 times more than foreign investments.”
Given the above, it was equally stunning to learn that dollar-for-dollar remittances has now been changed to Naira delivery.
This policy has not only crashed the naira to over 950 to $1 but it has reopened the floodgate for massive money laundering and capital flight from Nigeria!
According to Anthony Ani, “Some years ago, on my visit to London, I went to Western Union office, at Marble Arch, to test by remitting £500 to my son in Nigeria.
I first had to convert the money to dollars and to my surprise, Western Union gave me a quote in naira to be claimed by my son.
I refused their naira equivalent and insisted that my son must be paid in dollars.
It was obvious to me that there was an arrangement between our Nigerian banks and Western Union/MoneyGram, whereby the former pays from their excess naira liquidity while the later retains the dollars abroad.
In other words, the dollar remittance is retained abroad and is laundered by the Nigerian banks. This is definitely against the law which provides that all remittances must be brought into Nigeria in foreign currency via domiciliary account.
If by chance, as in my case, the dollar is remitted into Nigeria, the Central Bank of Nigeria on August 14, 2014, introduced the Outward Money Transfer Service and authorised the same MoneyGram and Western Union to re-export, in tranches of $5,000 per transaction, to Nigerians abroad, on payment of the naira equivalent at the CBN rate of exchange.
Thus, Nigeria is the only country in the world re-exporting its remittances.
It is relevant to note that the naira is not a convertible currency but remittances which are meant to stabilise our exchange rates are re-exported!
There is something wrong at our Central Bank…
The fact is that the Diaspora remittances are not retained in Nigeria and there is a collaboration between the CBN, Nigerian banks and Western Union/MoneyGram; in such an event, government must investigate the infraction, punish the money launders, and recover all past Diaspora remittances retained abroad!”
From the above analysis of the ex-Minister credited with introducing Diaspora Remittances into the Nigerian economy, the recent policy of the Tinubu administration stopping dollar end-user delivery destabilizes the naira and foments money laundering and looting. Remember that under Ani, Diaspora remittance of $4.5Billion came in at about the time $2Billion Abacha loot was exported out and yet the Naira remained stable at 82=$1!
In other words, the role of the Diaspora in stabilizing the country from the looting is undermined when the looters simply use our dollars to launder their stolen Nairas abroad!
This new policy must be stopped at once to stem capital flight and strengthen the naira as it has opened the laundromat for expropriation of looted funds.
The Artificial Intelligence site ChatGPT when asked “how does diaspora remittances grow a nation?” gave the following points:
-Increase in Foreign Exchange Reserves
-Boost to Consumer Spending
-Poverty Reduction
-Investment and Entrepreneurship
-Human Capital Development
-Strengthening Financial Institutions
-Foreign Investment and Diaspora Engagement
-Reduction in Brain Drain Effects
-Support in Times of Crisis
Yet acting CBN governor Folashodun Shonubi told State House correspondents, “Mr President is very concerned about some of the goings on in the foreign exchange market. One of the things we discussed is what could be done to stabilise and what could be done to improve the liquidity in the market and also the goings on in the various other markets, including the parallel market.
He added, “We do not believe that the changes going on in the parallel market are driven by pure economic demand and supply, but are touched by speculative demand from people.”
But if you stopped the Diaspora Remittance incentive scheme that increased forex inflows by 1556% and you also insist on naira payout instead of dollars, there will naturally by scarcity of dollars driving up exchange rate!
Besides this self-created devaluation problem of the CBN, findings by The PUNCH show the central bank circular dated August 9, 2023, “placed limits on the exchange rate for naira payout of Diaspora remittances.
The circular read, “Further to the circular referenced TED/FEM/PUB/FPC/001/004 dated July 10, 2023 and the meetings held with all banks and IMTOS, the Central Bank of Nigeria hereby announces an allowable limit of -2.5% to +2.5% of the Investors’ and Exporters’ window average rate of the previous day as the anchor rate for the naira payout option.”
In other words, the CBN is essentially cheating the Diaspora remitter and his Nigerian receiver of the full value of their foreign exchange! This is a double trouble for them in being literally shortchanged on their own funds.
Per media, “Shonubi had last week said the diversion of Diaspora remittances to the parallel market was putting pressure on the local currency.”
This is an outright lie as the remittances have always gone through the banking system. That they end up in the black market is nothing new and completely the fault of the CBN. If you could change dollar to naira at the bank, few would go to the black market but the unrealistic multiple exchange rate and official rate disparity was responsible. This is an elementary economic principle – capital doesn’t flow where it’s not valued!
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Punch investigation also revealed that “the naira has lost an essential source of support after the central bank’s long-delayed financial statements revealed that effective foreign-exchange reserves at its disposal were much lower than previously disclosed according to Bloomberg report.
The accounts published on Friday showed a previously undisclosed $7.5bn in transactions with JP Morgan Chase & Co and Goldman Sachs Group Inc.
In addition, it detailed an exposure in foreign-currency forward contracts of almost $7bn. The central bank also showed it vastly exceeded the limit placed on its lending to the government.
Adetilewa Adebajo said: “Given the state of the CBN balance sheet and the fact that the Naira is already at 945 to the dollar on the parallel market, the road to 1,000 looks unhindered.”
What this reveals is that the deception and violation of its transactions and powers respectively were self-inflicted injuries on the Naira which CBN is falsely trying to blame on the innocent Diaspora rather APC which overborrowed and actually just printed no-gold backed naira currency.
Punch finds that, “The move to a more liberal exchange system was designed to remove obstacles which had deterred foreign investors, but the expected jump in inflows has been slow in coming.
The CBN has also been unable to increase supply significantly through its interventions in the official window where the currency is traded, driving demand to an unauthorised market where the dollar is about 18 per cent more expensive.” https://lifeandtimesnews.com/naira-slump-cbn-clamps-down-on-speculators-restricts-diaspora-remittances/
In all honesty, an illegitimate presidency can only inspire investor confidence so far despite reported market rallying following the exit of the ruinous Buhari regime. Tinubu has not helped matters with drumbeats of war in Niger.
The Punch story proffered Ayodeji Dawodu’s solution thus, “The local currency will remain under pressure in the coming months unless the central bank increases its intervention in the market and/or incentivises foreign portfolio inflows,”. This is exactly what the CBN was doing before they aborted the Diaspora incentive and crashed the naira!
Another solution, per Punch, “To boost inflows, the central bank will have to raise interest rates and consider an International Monetary Fund programme, Head of Macro Strategy at Frontier Investment Management Partners, Charles Robertson, said.
“Nigeria’s interest rates remain deeply negative in real terms – the most negative in Africa among all the countries we follow, and second only to Argentina in the world.”
The question now is which is better, to borrow from IMF or World Bank who recently denied Uganda a loan over LGBT issues or to boost non-debt Diaspora inflows?
Punch continued “Seven-month zero earnings on crude oil sales worsen Nigeria’s forex crisis…
Data from the quarterly statistical bulletin of the Central Bank of Nigeria showed that the last time Nigeria had a record for earnings from crude oil sales was in August 2022.
This means that Nigeria has earned nothing from the sales of crude oil for about seven months from September 2022 to March 2023, according to the CBN data.
Amid the zero revenue from crude oil sales, Nigeria has been suffering declining oil production.
The Organisation of the Petroleum Exporting Countries recently said that Nigeria’s oil production declined in July 2023, making the country the third largest oil producer in Africa.
In its latest monthly report for August, the global oil cartel said Nigeria’s oil production decreased to 1.081 million barrels per day in July 2023… a huge decline of about 168,000 barrels bdp.
The PUNCH also observed that Nigeria had no record for the sales of gas from November 2021 to March 2023.”
The fact is that dollarized delegate buying by moneybags in last year’s primaries (Tinubu inclusive) sent the dollar sky high against the naira and there has been no significant recovery since.
The political class worsened things in this year’s elections and finally the N35million largesse reportedly given senators last week for vacation (“prayers in box”) pressured the naira as many traveled abroad.
The CBN knows what it did right and what it did wrong. Blaming Diaspora doesn’t work. Restore the Diaspora remittance incentive now!
- Emmanuel Ogebe is a US-based lawyer and Nigeria international affairs expert with the U.S. Nigeria Law Group, Washington.
