The latest World Bank annual development report indicates a positive trend in Nigeria’s Diaspora remittances with the figure rising to $21bn in 2023. FESTUS OKOROMADU writes on the importance of converting this potential to turnaround the nation’s economy.
The World Bank’s annual World Development Reports, or WDRs, for 2023 focused on, one of the world’s most important and pressing challenges, migration. According to the report, it is estimated that there are 184 million migrants worldwide.
It further hinted that migration issues are becoming more widespread and urgent due to severe divergences between and within countries — in terms of real wages, labour market opportunities, demographic patterns, and climate costs.
But it emphasized that migration makes substantial contributions to economic development and poverty reduction just as it also involves difficulties and risks.
Other positive benefits of migration highlighted include; migrants often bring skills, dynamism, and resources that strengthen destination economies. But most importantly, in many cases, they also strengthen the country of origin, providing a vital support mechanism for communities by sending remittances as a lifeline for their families, especially during times of turmoil.
Remittance to Nigeria
According to the report, remittances into Nigeria during the year under review witnessed a surge post COVID-19 years, as the figure had declined to $17 billion in 2020 from the previous year’s $24 billion, while it is estimated to have grown by over 19 percent, reaching $21 billion in 2023. This robust recovery is attributed to factors such as the economic resurgence in sending countries and the implementation of digital payment solutions, facilitating swifter and more cost-effective transfers.
“In 2023, remittance flows to low and middle-income countries (LMICs) are estimated to have reached $669 billion as resilient labour markets in advanced economies and Gulf Cooperation Council (GCC) countries continue supporting migrants’ ability to send money home. Thus, flows to the LIMCs grew at an estimated 3.8 percent in 2023, moderation from the high gains of the previous two years. Of concern is the risk of decline in real income for migrants in 2024 in the face of global inflation and low growth prospects,” the report read in part.
Nigeria is among the key remittance destinations in sub-Saharan Africa, with remittance receipts amounting to $24 billion in 2019 and $21 billion in 2023.
Nigeria maintains its lead as a major recipient, accounting for 38 percent of total remittance inflows into the sub-Saharan African region in 2023 on the back of strong remittance growth.
In terms of developmental programmes, financial analysts say these inflows play a crucial role in Nigeria’s economy, contributing significantly to household income, poverty reduction and investment in education and healthcare.
Nigeria is among the key remittance destinations in sub-Saharan Africa, with remittance receipts amounting to $24 billion in 2019 and $21 billion in 2023.
Nigeria maintains its lead as a major recipient, accounting for 38 percent of total remittance inflows into the sub-Saharan African region in 2023 on the back of strong remittance growth. These inflows play a crucial role in Nigeria’s economy, contributing significantly to household income, poverty reduction, and investment in education and healthcare.
Thus, confirming the World Bank President David Malpass’ preposition that, “Origin countries can maximize the development impacts of labour migration on their own societies by providing ways to facilitate remittance inflows, for example, by lowering the costs of sending and receiving transfers. Origin countries can also improve educational opportunities often in collaboration with destination countries, including language skills. They can also incentivize investment by diasporas, and support returning migrants as they reenter the labour market.”
According to the World Bank report, Nigeria recorded a moderate rebound in remittance inflow by 2 percent from $20 billion in 2022 to $21 billion in 2023, and was trailed by the likes of Ghana and Kenya, as major recipients, which posted estimated gains of 5.6 percent and 3.8 percent, respectively.
The report highlighted that in the last decade, 2018 was the peak period for foreign currencies inflows into the country from Nigerians in the diaspora while a total inflow of $24.31 billion was received into the country from diaspora but declined to $23.809 billion in 2019, $17.208 billion in 2020 amidst pandemic induced pressures.
Remittances generally sustained an upward trajectory between 2014 and 2021, with annual increases ranging from 5.9 percent to 14.7. However, there have been significant fluctuations in remittance inflows, with the biggest drops occurring in 2016 and 2020, likely due to economic downturns in both Nigeria and major sending countries.
Meanwhile, the last two years (2021 and 2022) have seen a strong rebound in remittance inflows, majorly propelled by factors such as economic recovery in sending countries and the implementation of digital payment solutions facilitating faster and more cost-effective transfers.
Looking ahead to 2024, the World Bank anticipates that a significant increase by 2.5 percent is expected in terms of remittance flows to the sub-Saharan Africa (SSA) region, adding that there is the likelihood of about 1.9 percent growth by the close of 2023, with remittance to the region reaching $54 billion. This growth is underpinned by strong remittance performance in countries like Mozambique (48.5 percent), Rwanda (16.8 percent), and Ethiopia (16 percent).
However, amidst this optimistic outlook, concerns arise about a potential decline in real income for migrants in 2024.
This apprehension is grounded in global inflation and low growth prospects, posing risks to remittance flows.
Furthermore, the trajectory of weaker global economic activity is projected to soften the growth of remittances to LMICs to 3.1 percent in 2024.
Contributing to this moderated forecast are slowing economic growth and the prospect of weaker job markets in several high-income countries.
Additional downside risks include volatile oil prices, fluctuating currency exchange rates, and the potential for a more pronounced economic downturn in high-income countries.
“Nigeria recorded a moderate rebound in remittance inflow by 2 percent from $20 billion in 2022 to $21 billion in 2023”
Government agencies drive to increase remittance
Aware of the key role diaspora remittance plays in the economy, the Governor of the Central Bank Nigeria, Olayemi Cardoso, last November pledged to look into the high charges on remittances inflow into the country.
The CBN Governor gave the assurance while hosting management of Nigerians in the Diaspora Commission, led by the Chairman/CEO, Abike Dabiri-Erewa, to the CBN headquarters in Abuja.
Cardoso expressed concerns over the staccato status of remittances and assured that investigations would be carried out and necessary actions taken to ensure Nigeria remains the highest receiver of remittances in Sub-Saharan Africa after Egypt.
Speaking during the meeting, Cardoso commended NiDCOM’s progress and initiatives less than four years and called for deepened synergy between the two organisations, promising that “any bottleneck to remittances will be taken out.”
Earlier, Dabiri-Erewa lamented the high tax rate on remittances, noting that Nigeria has the highest rate.
She said, “I believe Diaspora remittances can be improved if the challenges can be looked into and addressed.”
The NiDCOM Boss called on the leadership of the Bank to partner with NiDCOM in its numerous initiatives like the National Diaspora Policy, which the CBN is a major stakeholder, Diaspora Data Mapping, Nigerian Diaspora Investment Trust Fund, Diaspora Quarterly Lectures, Badagry Door of Return and Nigeria Diaspora Investment Summit to mobilize and increase Diaspora Remittances.
In another development, NiDCOM said it is working on a partnership with the African Institute for Remittances towards improving remittances in Africa.
The Executive Director, African Institute for Remittances, Amadou Cisse who disclosed this in Abuja, during a courtesy visit to NiDCOM, noted that Nigeria, the largest recipient of remittances in Sub-Saharan Africa, with a well-structured Diaspora Engagement Policy, is their major country of focus alongside Egypt.
“Dealing with Nigeria equals to addressing at least 75 percent of the issues Africa faces with remittances. This will impact the whole continent,” he said.
He also noted that the Institute has three main focuses which are to regulate remittances and ensure its compliance with international regulations, to gather accurate data for tracking remittances and to create policies to develop remittances.
Cisse stated that NIDCOM being a key player in Diaspora Affairs not only in Nigeria but Africa would be a key stakeholder in driving the aims and objectives of the Institute.
Receiving the delegation on behalf of Abike Dabiri-Erewa, the Secretary to the Commission, Sule Yakubu Bassi, assured the delegation of the Commission’s commitment to remittances development.
“The issue of remittance development has been on the front burner for NiDCOM. Studies have shown that 70 per cent of Nigeria Diaspora Remittances goes into consumption while only 30 percent goes into investment. Our goal is to see more percentage going into investments so the Diaspora can have more dividends to allocate to social consumption. To achieve that, the Commission has continued to partner with relevant stakeholders, consistently engage the Diaspora and execute programmes tailored towards improving remittances,” he said.
The African Institute for Remittances is a technical arm of the African Union designed to exclusively deal with issues of Remittances.
NiDCOM’s commitment to expanding remittance
There is no gainsaying that Dabiri-Erewa understands the importance of remittance to the Nigerian economy, as she had frequently hinted on its role as an economic factor for development, termed, “Diaspora Direct Investment (DDI)”.
Speaking on the importance of remittance to the nation’s economy recently, she said, remittance accounted for about 6.1 percent of Nigeria’s annual gross domestic product.
“It is pertinent for Nigeria and Nigerians to know the importance of Nigerians in the diaspora because they have contributed their skills and resources to the development of Nigeria in various sectors such as health, education, technology, finance, transportation, housing, entertainment,” she stated.
Comparing diaspora remittance to foreign direct investment to the country in recent times, she said, “In 2021, diaspora home remittance was $20 billion in 2021 while Foreign Direct Investment was $4.8 billion. Diaspora home remittance, therefore, is four times our FDI and contributes about 6.1 percent of our annual GDP. Our Diaspora (community) is now an economic factor for development which we have coined the term Diaspora direct investment (DDI).
Nevertheless, some financial analysts say they anticipate that while 2023 is poised for further growth, the rate of remittance inflow is expected to be more gradual compared to the preceding two years. This deceleration could be attributed to economic uncertainties and rising living costs in both Nigeria and sending countries. The sustained volatility in the global economic and financial landscape could impact remittance flows in the future, necessitating vigilant monitoring and potential policy adjustments.
Bearing in mind the urgent need to grow the nation’s foreign exchange portfolio, the CBN and the government must encourage Nigerians in Diaspora to engineer the developmental transformation Nigeria citizens are yearning for in this dispensation. This the government can do by implementing the necessary policies required to boost remittance.
