The Centre for the Study of Economics (CSEA), which is a knowledge-based institute, has said that the total direct remittances inflow into Nigeria, has reduced by 50 per cent, from $2.04bn to $1.01bn, between January and February 2020.
This decline is said to be a huge decline, when compared to the 2019 levels, when a total of US$23 billion, was remitted to make Nigeria the highest recipient in sub-Saharan Africa.
However, with many Nigerians residing in the diaspora of countries hit by COVID-19, including Spain, Italy, United Kingdom and the United States, their ability to work or remit funds during this time, has been reduced.
This remittance is a major source of income for vulnerable households in developing countries, and CSEA believes that if this recent development continues, the level of poverty in the country will be reduced.
The institution has urged the Federal Government to provide additional social safety nets, to aid poor and vulnerable individuals and households, such as ensuring that the distribution mechanism of the conditional cash transfer programme, is efficient.
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“The nation’s foreign reserves depleted by 5 per cent from US$35.1 billion to US$33.4 billion between March and April 2020, which is the lowest it has been since January 2018. From 2019, the reserves have maintained a downward trend as gross reserves are currently 22 per cent lower than the value in March 2019 at US$44.79 billion. The depletion in foreign reserves can be attributed to the Central Bank of Nigeria’s interventions in the foreign exchange market aimed at ensuring exchange rate stability.
Going forward, with the sharp fall in oil price as well as the decline in oil production, the reduction in inflows is expected to continue. Furthermore, the downward revision of the exchange rate from N305:US$1 to N360:US$1 would require additional drawdowns on the reserves. The exchange rate may continue to depreciate in the face of a continuous decline in forex earnings. Firms should leverage on the opportunities provided as a result of the pandemic such as credit facilities and import duty exemptions for specific goods to boost their capacity and embark on an import-substitution drive in order to complement the current supply of foreign exchange” the institute said.
