Folashodun Shonubi, the Acting Governor of the Central Bank of Nigeria (CBN), unveiled significant insights on the Nigerian Naira’s value during a lecture titled ‘Diaspora Remittances and Nigeria Economic Development,’ hosted at the National Institute of Security Studies (NISS) in Abuja.
Shonubi underscored the Naira’s substantial undervaluation based on economic modeling using the purchasing power parity concept. “An economic modeling of Nigeria using purchasing power parity would reveal the current significant undervaluation of the Naira,” Shonubi revealed during his address.
He emphasized the importance of enforcing strict measures to curb illicit remittances, channeling them into legitimate avenues to optimize economic growth. Shonubi also announced plans to form a panel that would conduct unannounced visits to banks suspected of illegally trading in dollars.
“We intend to expose and criticize commercial banks engaged in such illicit practices,” Shonubi stated firmly.
Addressing challenges within the existing remittance framework, Shonubi highlighted that the cost of sending money to sub-Saharan Africa from diaspora sources remains approximately 8-9% per $100, the highest globally. In an intriguing observation, Shonubi noted that while Nigeria received around $16.7 billion in remittances, a substantial portion of these funds continues to circulate outside the formal financial system.
“We are striving to encourage individuals to channel funds through formal channels rather than relying on informal routes, a challenge for effective management,” Shonubi emphasized.
Although efforts to incentivize formal market participation by offering a N5 rebate were implemented, this approach proved insufficient in the open market context, leading to the discontinuation of the N5 rebate. Acknowledging the importance of incentives, Shonubi expressed the need to attract individuals to the formal financial sector.
Furthermore, Shonubi disclosed a terminology shift, stating, “We will rebrand the foreign exchange market, known as the I & E market, to the Nigerian Foreign Exchange market, as it is the sole market we recognize.”
Ayodele Adeleke, the Commandant of the National Institute of Security Studies, highlighted the lecture series’ significance in enhancing the nation’s grasp of security issues. Adeleke emphasized the series’ strategic role within the 10-month course framework, designed to amplify understanding and stimulate focused discussions on pivotal topics.
Adeleke added, “Given the growing interconnections of economies, diaspora communities play crucial roles in fostering their nations’ economic progress, contributing significantly to overall economic growth.”
Shonubi’s revelations and CBN’s planned measures underscore the bank’s commitment to enhancing economic stability and promoting transparent financial practices in Nigeria.