The increase, which has been attributed to the Central Bank of Nigeria (CBN)’s “naira for dollar” incentive scheme, once again highlights the growing importance of diaspora remittances to Africa’s most populated country.

As Biodun Adedipe, an economist with Adedipe Associates Limited is quoted explaining, the CBN’s incentive scheme may well be the reason why the target of $34 billion in annual diaspora remittances was reached two years ahead of schedule.

However, despite this surge in remittance inflows, Nigeria continues to grapple with shortages of foreign exchange. Such forex shortages, in turn, contribute to the naira’s continued depreciation as well as the resultant rise in inflation.

In attempting to explain why Nigeria is not fully benefiting from the rising remittances, Adedipe points to the fact that a lot of the dollars sent do not find their way to the foreign exchange market in Nigeria. Adedipe explained:

However, this is not happening because “the reality is that in Nigeria’s situation, the dollar doesn’t leave where it is,” Adedipe explains. “The person that provides the naira equivalent here would rather keep the dollar equivalent outside there, so it doesn’t come into the FX market in Nigeria.” According to Adedipe, Nigerian authorities now need to find ways that “make it more attractive for those foreign currencies generated by migrant Nigerian workers to be remitted home.”