Tony Chukwunyem 
The flurry of developments in the financial sector, in recent weeks, clearly indicates that the Central Bank of Nigeria (CBN) is actively collaborating with the Federal Ministry of Finance to ensure exchange rate stability.
For instance, the CBN Governor, Olayemi Cardoso, and the Minister of Finance and Coordinating Minister of the Economy, Mr. Wale Edun, jointly addressed press conferences at the 2024 World Bank/IMF annual meetings in Washington last month, where they spoke about efforts the country is making to tackle exchange rate volatility.
Diaspora bond
Speaking at one of such conferences, Cardoso announced that Nigeria was considering a diaspora bond in the United States next year and is targeting remittance inflows of $1 billion a month.
He said Nigerians abroad are keen to invest and have already more than doubled the remittances they send home since the current administration began sweeping reforms last year, adding that remittance inflows, which amounted to a little above $250 million as of April this year, increased to over $600 million as of September.
Consequently, a diaspora bond in the United States, home to the largest group of overseas Nigerians, “could be on the horizon” in 2025, Cardoso said, noting that the Finance Ministry would manage a bond issuance.
“They really want to invest … beyond just financially,” Cardoso said of Nigerians abroad, adding that: “Our currency has now become extremely competitive and cheap. So they see the opportunity of taking positions in assets back home and in businesses back home.”
He stated that having addressed concerns raised by IMTOs, coupled with the assurances from Nigerians in the diaspora, the apex bank was confident that it would attract $1 billion monthly remittances.
As the CBN Governor said, “our team held productive discussions with leading IMTOs, where we collectively committed to growing remittance flows to $1 billion through formal channels into Nigeria…monthly.
“This target is both ambitious and achievable, and we are fully committed to mobilising resources to reinforce the collaborative task force which I am leading at the bank. We’re confident that we’ll get there.”
He further said: “Nigeria has such a strong diaspora community here; in the earlier stages of the reforms, IMTOs were having issues transferring money back to Nigeria, and we felt it was important to engage them, and we did.
As a result of that engagement, we identified particular problems, of which a lot of responsibility was shared. Things have since improved because as at the last meetings, I think, in April, monthly inflows were about $250 million, but as of September, it had risen to $600 million.
“With the recent announcement by Nigeria Interbank Settlement Systems (NIBBS) on Bank Verification Number (BVN), and other products that the banking industry is offering, and through engagement with the diaspora, we believe we will be able to move accordingly and again, rising from that engagement, we put our sights on increasing the inflows to $1 billion monthly and I’m confident that we will get there.”
According to him, Nigeria’s external reserves surged to $40.2 billion in October 2024, up from $38.4 billion recorded in September. He also noted that the country’s gross external reserves stood at $39.29 billion as at end of September 2024, an increase of 9.38 per cent from $35.92 billion as at the end of August 2024.
In his remarks at the press conference, Mr. Edun said the increase in the foreign reserves was the direct result of the government’s decision to allow the market to determine the naira’s value instead of a situation where the CBN would frequently intervene to bolster the local currency.
He pointed out that in the past, significant sums were spent monthly defending the naira, a practice that has now been curtailed in order to promote long-term economic stability.
He explained that by allowing the market dictate the exchange rate, Nigeria is curbing excessive foreign exchange interventions while organically boosting reserves. Edun said: “We’re allowing the market as much as possible to set the level for the naira, and we are building the buffers to improve that confidence and ensure that we have enough input cover.”
Foreign currency disclosure scheme
The Finance Minister returned to the country well in time for the October 31 meeting of the National Economic Council (NEC), the country’s highest economic advisory body.
However, it was his announcement, at the end of the meeting, that the government was introducing a nine-month programme, titled, “Foreign Currency Voluntary Disclosure, Depositing, Repatriation, and Investment Scheme”, or the “Disclosure scheme,” which allows Nigerians to deposit foreign currency held outside the formal banking system in
“The scheme offers a secure, confidential channel for people to reintegrate their legitimate foreign currency funds, promoting stability and growth for our nation
domiciliary accounts that made the headlines. Under the programme, which was launched on October 31, individuals can bring in foreign currency in cash without facing penalties, taxes, or scrutiny, provided that the funds are not linked to criminal or illicit activities.
Specifically, he said: “The disclosure scheme is a bold initiative aimed at integrating foreign currency outside the formal financial system into the formal economy. It strengthens transparency and economic resilience, setting us on a path to rapid economic growth.
“The scheme offers a secure, confidential channel for people to reintegrate their legitimate foreign currency funds, promoting stability and growth for our nation.
Guided by President Tinubu’s leadership and supported by the Central Bank of Nigeria (CBN) and Ministry of Justice, we are building a transparent and inclusive economy, aligned with best practice in anti-money laundering and countering the financing of terrorism.”
The Finance Minister had indicated at the event that the CBN would in a matter of days publish its guidelines on the scheme.
Guidelines
Thus, last Wednesday, the apex bank released guidelines on the implementation of the scheme, which it said, came into effect on November 6, 2024.
Under the guidelines, Commercial, Merchant and Non-Interest Banks (CMNIBs) were directed by the regulator to ensure that, in implementing the scheme, they comply with all Anti-Money Laundering/ Combating the Financing of Terrorism/Countering Proliferation Financing (AML/CFT/CPF) laws and regulations.
It also directed the CMNIBs to “ensure that risk mitigation measures are put in place to minimize operational, technical, or fraud risks.”
“In particular, the provisions of the regulatory framework for Bank Verification Number (BVN) operations and Watch-List for the Nigerian Banking Industry (as amended) and other applicable laws and regulations, shall apply to CMNIBs in the implementation of the scheme,” the CBN added.
Furthermore, the guidelines listed CMNIBs’ responsibilities with regard to the implementation of the scheme, including: opening domiciliary accounts designated for the purpose of the scheme for intending participants; receiving and processing applications from intending participants; accepting deposits of disclosed Internationally Tradable Foreign Currencies (ITFCs) from participants, either directly or from a legal person nominated by the participant; ensuring that ITFCs deposited by a participant are held in the designated domiciliary account; issuing a receipt to the participant not later than 24 hours from the time the ITFC is deposited,, indicating the originating country of the funds and acknowledging that such funds were received for the scheme.
For intending participants, the guidelines stated that they may invest their funds in “Permissible Investment Instruments and/or Permissible Investment Sectors only,” and permit the CMNIB to share relevant account information with the CBN, “the Federal Ministry of Finance, and any other party with whom it would be legally necessary to share such information.”
Participants are also required to confirm that funds deposited under the scheme were not generated from illegal or criminal sources, that their involvement in the scheme is voluntary; and that they provided complete and verifiable information to the CMNIBs.
On operation of the scheme, the guidelines stipulate that in processing an application made by an intending participant, CMNIBs should obtain information including, “the applicant’s Bank Verification Number and National Identification Number (for natural persons and directors of incorporated entities) or Tax Identification Number (for legal persons); the amount of the ITFC sought to be deposited (and) details of the applicant’s designated domiciliary account into which the ITFC shall be deposited.”
In addition, the guidelines stated that CMNIBs were not permitted to impose any restriction on the withdrawal from the designated domiciliary account of the participant or terminate any investment made in a “permissible investment instrument or permissible investment sector with any such ITFC.”
Other highlights of the guidelines include: “A CMNIB shall permit a participant to, at any time, exchange part or the whole ITFC in the participant’s designated domiciliary account for naira at the prevailing exchange rate, provided that such conversions are properly disclosed and reported in the CMNIB’s foreign exchange returns and CMNIBs may trade with any deposited ITFC not immediately invested by a participant, provided that the funds would be made available to the participant when needed.”
The guidelines also said that every CMNIB is expected to render monthly returns to the apex bank on the operation of the scheme not later than the 14th day of the following month.
The regulation further stated that information provided by participants “shall be treated with confidentiality in accordance with relevant legislation (and) CMNIBs shall respect the privacy rights of participants and abide by the Nigerian data protection laws and regulations.”
Conclusion
Although it is undoubtedly too soon to start making predictions about whether the scheme will yield expected results or not, analysts believe that the economy will be positively impacted if the fiscal and monetary authorities sustain the present high level of coordination be – tween them.
