The scarcity of foreign exchange (FX) is an agelong problem that has dominated economic discussions in Nigeria. Being a developing and import-dependent nation, Nigerians often need FX to facilitate business transactions abroad, embark on overseas travels, pay school fees, medical bills and fulfill other commitments (like mortgage) abroad etc.
With the growing population of Nigerians who need FX and the drastic drop in foreign exchange earnings by the Federal Government of Nigeria, supply has become grossly insufficient. The Naira (NGN)has continued to lose value as a result, despite the evident efforts to stem this unfavorable tide.
To salvage this uncomfortable situation, government stakeholders (primarily, the Central Bank of Nigeria) have explored an array of complimentary policies. Earlier this year, the apex bank introduced a policy that mandated all remittance inflows into the country to be denominated in United States Dollars (USD); this was followed by the introduction of the ‘CBN NGN for USD Scheme’ scheme which rewards beneficiaries of remittance inflows with NGN5 for every USD received.
These efforts to boost availability of FX in the country have remarkably led to increased inflow of foreign exchange earnings through remittances over the period. Unfortunately, the NGN has continued to fall in the parallel market with the USD hitting an all-time low of NGN545 per USD in 48 years.
In the face of all of these, what is the fate of the average Nigerian? How does the average Nigerian send money abroad for the upkeep of loved ones and other sundry needs? And for the Nigerians who have genuine reasons to save (and possibly invest) in foreign currency, how do they access FX conveniently?
With the USD policy on remittances, inbound remittance has become a bit complicated. This is because the remittance beneficiary will have to visit the bank to pick up or withdraw the USD and then find ways to change it to NGN. This has made sending money to loved ones in Nigeria a hassle. Imagine the scenario where Bola wants to send money for his mum’s emergency surgery on a Saturday; the mum will leave everything to fate until Monday when she can get someone to pick up the USD from the bank and find a currency exchanger to convert the USD to NGN. The NGN value then needs to be deposited in a bank before it can be sent to the hospital. This is all Bola must put up with just to send money to his mother for her surgery. This has caused the Nigerian diaspora to resort to other informal means to get NGN to their loved ones back home, detracting the CBN’s agenda to increase the supply of USD in the parallel market.
Enter Kaoshi Network: a digital platform that allows the Nigerian diaspora to directly swap their FX for NGN with Nigerians who have NGN but need USD.
How it Works: Nigerians post their request for USD in their domiciliary account. They set their preferred exchange rate (within a range). This offer is broadcasted across the globe so that the diaspora can see this offer. The Nigerian diaspora can shop across the different posted offers selecting the best offer at any given time. After selecting an offer, they make payment to the domiciliary account of the Nigerian requesting USD via licensed international money transfer organizations like Worldremit, Remitly, Ria, etc. Once the USD is deposited into the assigned domiciliary account, in real time, the Nigerian diaspora’s beneficiary gets NGN from the Nigerian needed USD in exchange for his NGN. The currency swaps are all guaranteed and secure. For more on this check out this brochure.
Kaoshi has been designed end-to-end to ensure everyone is happy. The average Nigerian can source USD in their domiciliary account at their own specified exchange rate, the Nigerian diaspora can conveniently send NGN to their loved ones back in Nigeria, and the regulators like the CBN are also happy as more USD is sent back into Nigeria, instead of via informal means that malign the CBN’s ambition to prevent the continuous fall of the NGN.
The charts below compare the exchange rate on Kaoshi Network with that of the Parallel Market rates as obtained from abokiFX.com. It can be clearly seen that Kaoshi Network’s rates are significantly lower than those on the parallel market. This is not surprising as the Kaoshi Network provides a platform that allows for a direct and disintermediated currency exchange, exactly what the CBN wanted to accomplish by instituting a USD-remittance only policy, which makes USD more available in the parallel market and reduces the pressure on the NGN. Kaoshi Network’s P2P swap was exactly created for this purpose!