Economy

Diaspora Remittances: Taking Full Advantage of the Cash Flow

In February 2021, the Central Bank of Nigeria reported a huge drop in the country’s diaspora remittances. The figure was $13.65bn lower when compared to the 2019 remittances of $5.72billion which, in turn, was lower than the 2018 remittances figure of $11.23 billion. Ripples and Metrics examined the International Payments Data and observed that Diaspora remittances into Nigeria fell by 71.2 per cent from $19.16 billion in 2019 to $5.51 billion in 2020.

The figure reported in February of 2021 was the lowest figure in the recent history of Nigeria’s diaspora remittances since 2013 when Nigeria received only $2.72billion. The cause of the recent titanic fall in the remittances was obvious – COVID-19 had a significant effect on the income of Nigerians working abroad.

However, Augusto and Co, a Lagos-based, pan-African credit-rating agency, in a recent report, envisioned that Nigeria’s Diaspora Remittances will shoot up, reaching $22b by the year 2021. That is a year-on-year rise of 5%.

The firm made this known publicly in its 2021 Nigeria Diaspora Remittance Report and Survey, wherein it further anticipates a consecutive year-on-year rise of 2% of remittances inflow into the country, making it $22.5b by 2022.

The report came few days after World Bank made it public that sub-Saharan Africa receives huge financial flow in diaspora remittances. Only Nigeria out of seven African remittances heavyweights experienced contraception in the 2020 report. But with the forecast of five per cent increase in 2021 and 2 per cent increase in 2022, the future seems to be looking bright for the Nigerian economy. But if the Federal and State Governments do not liaise with the apex bank in the land and come up with policies that will ensure that the remittances are tactically invested in the economy, nothing much may come out of it.

Mr. Jimi Ogbobine, head of research at Augusto Consulting, in a recent webinar on the crucial report called attention to the fact that Nigeria’s diaspora remittances are gravely shrouded in economic obscurity as they remain grossly under-researched. This makes the economic potentials of such remittances elude governments at all levels. He noted that target market studies on diaspora remittances in Nigeria are scanty and that the research firm took it upon itself to look into this bankable market that has hitherto been ignored.

The accretion of the massive sums from abroad now makes remittance a major funder of the country’s economic growth and development. The remittances flow into the economy through formal funnels; that is, international remittances service providers and commercial banks.

The impact of diaspora remittances on the home economy cannot be overemphasised in terms of meeting basic needs, financing education, funding investments, etc. Ogbobine drew attention to formal researches in the field when he said “Previous studies have also shown that about 70 per cent of remittances are used for consumption purposes, while 30% of remittance funds go to investment-related use.”

Ogbobine added that estimated migrant remittances for Africa in 2020 was $78.3 billion – 12% of the total global remittances:

“However, only two states within the continent represent about three-fifths of the continent’s entire migrant remittances. Egypt’s diaspora remittances of $24.4 billion in 2020 is not only the largest in Africa but also represents about a third (31.1%) of the continent’s entire migrant remittance.

“Nigeria ranks behind Egypt with $21 billion which represents about a quarter of the continent’s global remittances. Morocco driven by its large French diaspora represents about eight per cent of the continent‘s remittance inflows with $6.3 billion. Zimbabwe continues to suffer the effects of the dysfunction in its forex regime” This shows that Nigeria used to be in an enviable position as far as diaspora remittances were concerned. Sadly, it’s no longer the case.

According to the report, “Nigeria’s domestic policy conundrum on foreign exchange created many challenges to the wider macro contractions caused by the pandemic. Outside Nigeria and Kenya, the other states within the top seven bracket experienced varying degrees of contraction in diaspora remittances between five per cent and 9.4 per cent in 2020.”

The World Bank recently recorded that diaspora remittances to Africa experienced a decrease by an estimated figure of 12.5% in 2020 to $42 billion because of the 27.7% decline to Nigeria that accounts for more than 40% of the cash flow to Africa.

World Bank Migration and Development current update has it that apart from Nigeria, diaspora remittances to Africa experienced a surge of 2.3%, with 37% growth found across other African countries such as: Ghana (5 per cent), Kenya (9 per cent), and Mozambique (16 per cent).

World Bank report categorically affirmed: “Remittances to Sub-Saharan Africa declined by an estimated 12.5 per cent in 2020 to $42 billion. The decline was almost entirely due to a 27.7 per cent decline in remittance flows to Nigeria, which alone accounted for over 40 per cent of remittance flows to the region.

“Excluding Nigeria, remittance flows to Sub-Saharan African increased by 2.3 per cent. Remittance growth was reported in Zambia (37 percent), Mozambique (16 per cent), Kenya (9 per cent) and Ghana (5 per cent).”

On the global scale, 2018 saw remittances shot up to $689 billion as developing countries got 77%, while Mexico, China, Egypt, India, and Philippines made the top of the list of countries raking in mammoth sums in diaspora remittances.

All of these are figures which are very much in doubt because Africa is not a figure-preserving continent. However, there are huge pointers to the near accuracy of some of these claims.

Read Also: CBN Orders Closure of Naira Remittances Ledgers

Nigerians can be described as universal citizens. The fantastic implication of this assertion is the huge influx of money from different economies around the globe especially Europe and America, for they have the highest number of Nigerian migrants. The United Nation pegs the figure of Nigerian legal immigrants at 1.3 million. The US has 22.6 per cent.

Nigeria comes second in Africa after Egypt where diaspora remittance is concerned. Nigeria diaspora remittance is said to be the 10th largest in the world. It is the 40% of cash flow into sub-Saharan African, the second basic source of foreign exchange for Nigeria.

The problem is, hardly do we see the impact on the economy as most of the remittances are reported to be spent mostly for consumption purposes. With the current prediction of a possible diaspora remittance increase in 2022, can Africa wake up from the evil slumber of merely consuming?

According to PwC, Nigeria received $25 billion in 2018 – 83 per cent of the national budget, 11 times the foreign direct investment for the year, and 6.1 per cent of GDP. Experts agree that because most of the transfers enter the country in little amounts and through unpopular means, it is hard to achieve absolute accuracy on the Nigerian diaspora remittances. But the fact remains that Nigeria makes money every year through this channel.

No amount will ever be enough to cushion the harsh effect of the Nigerian economy on the masses if the foreign income is not strategically utilised. These are profitable channels through which the government can make judicious use of the diaspora remittances.

Nigeria must find a way to create a plan for development by Diasporas that is complementary to the actions of public authorities and international donors.

There must be deliberate diaspora engagement and the government should create opportunities for diasporas to engage in economic development. Specific actions include identifying goals, mapping diaspora location and skills, fostering a relationship of trust with the diaspora, maintaining a strong means of communication with the diaspora, and ultimately encouraging diaspora contributions to national development.

Categories: Economy, Features

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