A knowledge-based institute, Centre for the Study of Economies (CSEA) yesterday, said that total direct remittances inflow into Nigeria declined by 50 per cent from $2.04 billion to $1.01 billion between January and February 2020.
This, it said, is significantly lower than 2019 levels, when a total of US$23 billion was remitted to make Nigeria the highest recipient in sub-Saharan African.
However, with many of its citizens resident in the Diaspora living in countries severely hit by the COVID-19 pandemic including Spain, Italy, the United Kingdom and the United States, their ability to work and remit funds has been significantly limited.
Given that remittance is a major source of income for vulnerable households in developing countries, the centre believes that recent development could increase poverty and further widen inequality.
According to the statement by the group, in the coming months, remittance flows are expected to continue declining as a recent World Bank report noted that flows to low- and middle-income countries in sub-Saharan Africa will fall by 23.1 per cent in 2020.
It has however urged the Federal Government to provide additional social safety nets for the poor and vulnerable by ensuring that the distribution mechanism of the conditional cash transfer programme is efficient and equitable, stressing this would go a long way to mitigate the impact on vulnerable households.
“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.