October 25, 2024

Nigeria is considering a diaspora bond in the United States next year and is targeting remittance inflows of $1 billion a month, its central bank chief told Reuters on Thursday.

Central Bank Governor Olayemi Cardoso said Nigerians abroad are keen to invest and have already more than doubled the remittances they send home since the current government began sweeping reforms last year.

As a result, a diaspora bond in the United States, home to the largest group of overseas Nigerians, “could be on the horizon” in 2025, Cardoso said in an interview on the sidelines of IMF and World Bank meetings in Washington, D.C. The Finance Ministry would manage a bond issuance.

“They really want to invest … beyond just financially,” Cardoso said of Nigerians abroad.

“Our currency has now become extremely competitive and cheap. So they see the opportunity of taking positions in assets back home and in businesses back home.”

President Bola Tinubu took charge of Africa’s oil-producing behemoth last year and found a multi-billion dollar backlog of foreign exchange payments, crippling fuel subsidy costs and a tightly controlled naira currency that was hindering investment.

Tinubu appointed Cardoso in September 2023; his predecessor, Godwin Emefiele, is facing trial on charges of criminal fraud and corruption.

Cardoso said the bank’s efforts to restore investor confidence were working, and painful reforms, with the naira worth a quarter of its value when Tinubu took office and fuel prices five times as high, are paying off.

Remittances hit $600 million in September, from $250 million a month in spring this year, he said, and authorities are targeting $1 billion a month.

“I would be surprised if we are not there by this time next year,” he said.
Reserves are now above $40 billion, and Cardoso said the weak naira could help long-drawn efforts to diversify the economy away from oil.

“Now that our currency is relatively competitive … there should be the opportunity for those who have relied so much on importation to now beef up the productive activity that has so greatly eluded us over these years,” he said.

Nigeria’s naira currency hit record lows after the government of President Bola Tinubu relaxed controls – a move that has eased dollar shortages.

Nigeria’s naira currency hit record lows after the government of President Bola Tinubu relaxed controls – a move that has eased dollar shortages.

Cardoso said the bank would be “vigilant” in monitoring inflation and let economic data drive interest rate decisions.

Policy consistency, he said, would lure longer-term foreign investor cash; so far, investors were still testing the system.

“Only time can show that you can stay the course,” he said.

Cardoso said his meetings with investors, ratings agencies and Nigerians abroad had provided “an element of validation” to the government’s tough choices.

“It is necessary for people back home who have felt the brunt of a lot of these reforms to be able to … see that we are on the right course,” he said.

REUTERS