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Nigeria’s naira-for-dollar incentive not enough to bolster currency

By David Whitehouse
Posted on Friday, 12 March 2021 19:54

Nigerian naira and U.S. dollar banknotes are seen in a picture illustration, July 14, 2020. REUTERS/Afolabi Sotunde/Illustration

Nigeria’s new naira-for-dollar plan to encourage remittance payments will do little to meet its stated aim of stabilising the currency, analysts say.

Central bank Godwin Emefiele, who announced the introduction of an incentive of N5 for every $1 of remittances on 6 March, said the aim was to increase incoming flows of foreign currency, and in the process support exchange-rate stability.

The scheme amounts of an incentive of about 1% in naira to send dollars home. In itself, that’s “unlikely to contribute to currency stability”, says Anaïs Auvray, West Africa consultant at the Africa Matters advisory firm in London. “It enhances the probability that more naira will need to be printed, increasing the risk of further devaluation against the dollar.”