Enough of Nigeria’s dependence on Diaspora remittances

Early this year 2021, the World Bank reported that diaspora remittance in Nigeria for the year 2020 fell to $17 billion from $23 billion in 2019. Analysts attributed the use of alternative platforms powered by blockchain technology, partly, as a reason for the reduction. Since then the federal government has taken steps not only to stabilise the Naira but increase diaspora remittances. The crux of this article is to examine why the government has relegated our timeless attribute of resilience and ingenuity as a nation, to focus on enhancing remittances from the diaspora, rather than focus on empowering local enterprises with the potential to generate FX to do so.

A few facts about Diaspora and Remittances

The word diaspora comes from the ancient Greek, dia speiro, meaning “to sow over’’. It is translated to mean “dispersion” or “scattering”. Most definitions typically refer to the dispersion of the Jews. Wikipedia calls it “a scattered population whose origin lies in a separate geographic locale”. In 2020, total international migrants were estimated to be 281 million people, that is, 3.6% of the world’s population, out of which about 15 million are touted to be Nigerians. In 2017 alone, about 1.3 million people left Nigeria in search of greener pastures.

According to the International Monetary Fund, remittances are household income from foreign economies arising mainly from the temporary or permanent movement of people to those economies. Remittances include cash and non-cash items that flow through formal channels such as electronic wire, or informal channels, such as money or goods carried across borders.

In 2018, Nigerians abroad sent a total of $25 billion representing about 6.1% of GDP that year which made Nigeria second in Africa, after Egypt with $28 billion. However, recent reports from the world bank show that in 2019 it dropped to $23.81 billion; and in 2020, to $17.21 billion, representing four percent of Nigeria’s gross domestic product in 2020.

India’s estimated Diaspora population is 17.9 million; it received $245.27 billion in remittances in the three years between 2018 and 2020 while Nigeria, with an estimated 15 million migrants received about $64 billion within the same period. Bangladesh is estimated to have a Diaspora population of 7.4 million in 2020. It had a total remittance of $55.68 billion from 2018 to 2020.

In 2020, the following five countries came tops globally for remittances inflow; India ($83 billion), China ($60 billion), Mexico ($43 billion), the Philippines ($35 billion), and Egypt ($30 billion). India has occupied the top position since 2008. According to the World Bank, the decline in inflows to sub-Saharan Africa was mostly due to a 28 percent decline in remittance flows to Nigeria. Excluding flows to Nigeria, remittances to sub-Saharan Africa increased by 2.3%, demonstrating resilience.

When remittances were measured against the GDP of recipient countries in 2020, it was 4.0% in Nigeria, 3.0% in India, and 6.6% in Bangladesh. It is also on record that remittance flows to low and middle-income countries (LMICs) reached $540 billion in 2020, just 1.6% below the 2019 total of $548 billion.

In 2020, the average cost of sending USD 200 to lower-middle-income countries remained high at 6.58%, well above the SDG target of 3%. The highest average remittance costs, at about 8.2% was seen in sub-Saharan Africa, while South Asia had the lowest average remittance costs at 4.9%. Others include: Europe and Central Asia (6.4%); East Asia and Pacific (6.9%); the Middle East and North Africa (6.6%); and Latin America and the Caribbean (5.6%).

Recent research by the World Bank published on its website revealed that about 50% of Nigeria’s population are willing to relocate abroad should they have the opportunity. In West Africa, Nigeria ranked 3rd, after 70% of Liberians and 60% of Sierra Leoneans showed common interest. Among Nigerians who have considered emigration, their main reasons hover around economics, seeking employment, escaping economic hardship/poverty, and pursuing better business prospects. Other reasons include a good atmosphere, peaceful co-existence, food security, adequate employment, alluring opportunities, provision of skills, good transportation sectors, good education, fewer conflicts, democratic elections, fewer thefts and arson as well as fewer means of taxation. In terms of contribution, Diaspora communities can make a unique contribution to the development of their home countries—especially toward building physical capital and productivity plus ultimately helping to boost job creation, living standards, and higher growth. In addition to supporting capital investment, diasporas also support productivity by funding education, training, and healthcare.

Coming next is the concluding parts (1 and 2) of this article which address Nigeria’s experience in diaspora remittances and recommendations with potential to solving issues around diaspora remittances shortfall, alternate channels and the right exchange rate that is expected to engender prosperity for both the FG and the citizens.

___________________________________________________________________________

Adolphus Aletor, FCA, MCIB, a banker and finance analyst, is the managing director/CEO, Rigo Microfinance Bank; he can be reached on +2348033410380 (WhatsApp only) or jiyere@yahoo.com