The Nigerian diaspora has emerged as a critical force in bolstering the naira's stability in the foreign exchange market, particularly during the festive season. Their significant inflows, combined with recent policy changes by the Central Bank of Nigeria (CBN), are reshaping the narrative of the naira's resilience and the broader FX market.
As Nigerians abroad return home for Christmas or send money to their families, the foreign exchange market has experienced a surge in dollar inflows. These remittances have not only boosted liquidity but also contributed to the naira's recent appreciation. Officially, the naira traded between N1,660 and N1,525 per dollar, with a steady parallel market rate of about N1,660.
Muda Yusuf, CEO of the Centre for the Promotion of Private Enterprise (CPPE), highlighted the critical role of diaspora remittances. “During the holidays, we see a sharp increase in foreign currency inflows. These funds, whether sent for family upkeep or holiday spending, enhance liquidity in both the official and parallel markets,” Yusuf explained.
The CBN's Electronic Foreign Exchange Matching System (EFEMS) has further stabilized the market by enhancing transparency. Diaspora inflows, coupled with proceeds from the recent $1.7 billion Eurobond issuance, have created a conducive environment for the naira to thrive.
Ayodele Akinwunmi, senior relationship manager at FSDH Merchant Bank, also emphasized seasonal trends. “The Christmas holidays typically reduce dollar demand while increasing supply. This dynamic, combined with diaspora remittances, provides the FX market with much-needed stability.”
Charlie Robertson, head of macro strategy at FIM Partners UK Ltd, underscored the transformative power of the Nigerian diaspora on the nation’s economy. He noted that their contributions extend beyond remittances, supporting sectors like real estate, retail, and small businesses that rely on foreign currency inflows during festive periods.
Aminu Gwadabe, president of the Association of Bureaux De Change Operators of Nigeria (ABCON), called for increased integration of diaspora remittances into official market channels. “The CBN should prioritize leveraging diaspora funds to stabilize the naira further. Expanding the role of Bureaux De Change (BDCs) in facilitating these inflows could also help manage market volatility effectively,” he said.
Experts agree that maximizing the diaspora’s impact on the FX market requires strategic policies. Beyond seasonal boosts, the government must continue fostering confidence through transparency and innovative systems like EFEMS. The strong reception to Nigeria’s Eurobond issuance also highlights international confidence, which could be further enhanced by steady remittance inflows.
With the festive season in full swing, Nigeria’s diaspora remains a vital driver of economic stability. Their contributions underline the importance of leveraging human capital and external resources to ensure the naira’s resilience in an ever-evolving global financial landscape.
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