Diaspora Nigerians Remittance, Arbitrage and Leadership Willful Blindness
Investopedia described Arbitrage as basically buying in one market and simultaneously selling in another, profiting from a temporary difference. This is considered riskless profit for the investor/trader. It describes Currency arbitrage as the exploitation of the differences in quotes rather than movements in the exchange rates of the currencies in the currency pair. Forex traders typically practice two-currency arbitrage, in which the differences between the spreads of two currencies are exploited.
As the global economy reels from the impact of the decline of oil revenue and its domino effect, many countries are increasingly turning to their Diasporas remittance to help to cushion the negative effect. Many countries have developed or are developing strategies to tap into the Diaspora remittance. Please see the table below. Please note that countries like India, China, Philippines, Egypt, Pakistan, Bangladesh and Vietnam which have encouraged remittance from their Diaspora have benefited from increased inflows.
Top Remittance Benefiting Countries in billions of dollars 2009 - 2015
Of all the top remittance benefiting countries, the Philippines Government has been encouraging her Diasporas the most. I have done consulting work for BDO (largest bank in the Philippines) US affiliates, PNB, RCBC, Metro Bank, then PCI and money transmitters that are not bank affiliates and I can say unequivocally that the 50% increase in remittance over a six year period is connected with the Government of the Philippines effort to attract remittance revenue from her Diasporas. The banks in the Philippines with the government encouragement are competing with each other to attract remittance funds. The exchange rate given to the remitters are virtually same in the US and in the Philippines and I have no reason to believe that the rate is not the same from the other countries from where they send money home. In one of the banks affiliates, I noted that Filipinos who want to buy or build homes are wooed with all kinds of incentives. The Philippines government recently called their Diasporas their 'New Heroes'.
Nigerian Government Attitude Towards Remittance
I used the Philippines Government attitude towards remittance to highlight the willful blindness of the Nigerian Government towards remittance. The above graphs shows how relatively flat remittance from Nigerian Diasporas have been over the six year period. This is not unconnected with the lukewarm attitude or downright disdain manner towards the efforts of the Diasporas. To begin with, it is unconscionable that the Nigerian Government has allowed the ongoing daylight highway robbery of the hard earned money of her Diasporas by various money transmitters and banks. Here in the US, Western Union and MoneyGram charge about $10 to send up to $900. The exchange rate is about N197 to $1. The same $1 in Nigeria will fetch at least $260. For a Nigerian Diaspora who sends $900, he will lose N56,700. This amount may be enough to pay for school fees for a University student. By allowing this robbery to continue on her Diasporas the Government of Nigeria has shown callous disregard to their welfare. Most of the people sending money home are trying to help alleviate the hardship that their relatives and friends are facing due to the government policies. The government should be happy that the generosity of the Diasporas have helped and still helping to cushion the hardship Nigerians at home are facing.
The Nigerian Government is facing enormous cash squeeze and one would have thought that the government officials will look into ways to encourage the Diasporas to send more money home as part of easing the cash squeeze. The government must stop this daylight highway robbery of her Diasporas and by so doing may reap the benefit of increase in revenue from her Diasporas. The Nigerian Government must act fast before arbitrage is institutionalized which will make eradicating it difficult. Nigeria is finding it difficult to generate enough electricity due to the effects of the powerful generator importing club. The time to act is now.