One of the ironies of the Nigerian economy is the fact that at a time that it should be reaping sustained windfalls from high oil prices in the international market, the country has, instead, been experiencing diminishing (foreign exchange) inflow from oil sales. The price of crude oil for close to one year (since the onset of the Russia-Ukraine war in February 2022) has remained averagely above $100 per barrel. More than ever before, however, in the past couple of years, the country has been going through an unprecedented forex crunch (external reserves decline) and the drying up of all foreign exchange inflow. This is owing, in part, to Nigeria’s continued inability to meet up its Organisation of Petroleum Exporting Countries (OPEC) allocated oil production/sales quota. The bizarre phenomenon of oil theft; vandalism on critical oil infrastructure, as well as massive willful sabotage of facilities have all also combined to consistently weaken the oil production/supply capacity of the country. While Nigeria’s OPEC quota is almost two million barrels per day, the country for the better part of 2022 produced less than a million barrels per day.
In the face of all these — even when the country is already finding it difficult to borrow from abroad via bond issuance — remittances from the Diaspora appear to be offering some sort of lifeline with regards to forex inflow. According to the World Bank Migration and Development Brief (MDB), remittance inflow into Nigeria in 2022 is estimated at $20.9 billion; an increase of about 7.5 percent from $19.5 billion inflow recorded in 2021. Remittance flows, according to the World Bank document, are expected to globally reach $794 billion in 2022. However, in sub-Saharan Africa, remittances are expected to slow to 5.2 percent in 2022, compared to 16.4 percent growth recorded in 2021.
Surprisingly, however, Nigeria maintains the lead in sub-Saharan Africa. Thus, according to the World Bank, “Nigeria retained its position as the highest recipient of remittances in sub-Saharan Africa during 2022, followed by Ghana, Kenya, and Senegal. Also, Nigeria is included among the top ten recipients of remittances globally.” Still heartening is that Nigeria is expected to maintain strong remittance flows in 2023. However, according to the World Bank, remittances to sub-Saharan Africa in 2023 are projected to soften to 3.9 percent growth “as adverse conditions in the global environment and regional source countries persist.” But, for Nigeria, the Word Bank says the sustenance of the “Naira for Dollar” scheme is expected to support diaspora remittance inflow, adding that “the launch of the e-Naira, Nigeria’s digital currency, could also help migrants and remittance service providers have easy access to bank accounts.”
These cheery performances of Nigeria and outlook for improved diaspora remittances totally agree with the outcome of a study by PriceWaterhouseCoopers (PwC) in August 2022. Tagged, “Nigeria Brain Exports: The Optimal Path to Growing the Nigerian Economy”, the study adopts the concept of ‘Global Value Chain (GVC)’ — stating, “we recommend placing Nigerians in high-end GVCs.” The study says that given “Nigeria’s unique assets and attributes…the best development path should be where Nigeria exports Brain Capital into higher value-added global services markets.” Further buttressing this possible gain, the PwC report posits that: “Nigeria has a significant Brain Capital advantage with a large youthful population of an average age of 19 years. Considering the ageing population in countries such as Germany, Japan, Italy and the United States, it is estimated that the world-wide working age population will see a ten percent decline by 2060. Japan in particular tops this list with 28 percent of its population above 65 percent and Italy comes second with 23 percent. In contrast, only 2.7 percent of the Nigerian population is above 65 percent; which means Nigeria is strategically positioned to supply labour to the global market, a strong comparative advantage.”
Noting that global service delivery by Nigerians has already started, the PwC study stated, “Nigeria has shown, across several service sectors, including entertainment, sports and music that it has talent that can compete and win opportunities in the global market. Earnings of Nigerians who have tapped into GVCs significantly outclass their counterparts who may be considered equally capable but who operate only in the Nigerian market.” The study named many Nigerians who are players with reputable football clubs, for instance, across the globe and the huge sums they’re paid in hard currencies — and from which they remit substantial part (home) to Nigeria.
In a section it called, ‘Looking Beyond Oil’, the PwC study says “the most pressing reason for diversification (of the Nigeria economy) is that Nigeria’s oil production per capita is insufficient to launch its citizens into prosperity. The 2020 average daily production value of 1.8 million barrels of crude oil means the country averages about 3.3 barrels per Nigerian per year before equity cuts (Nigeria does not own 100 percent of its oil ventures). The delayed reform of Nigeria’s Petroleum Industry, as seen in the Petroleum Industry Bill (PIB), has also prevented massive amounts of investment which could have unlocked significant value.” The study noted that “oil does not solve the unemployment problem of the country as the oil and gas sector accounts for less than one percent of total employment in Nigeria.”
In another study in 2019 by PwC titled, ‘Strength from abroad: The economic power of Nigeria’s diaspora’, it was revealed that Nigeria was already harnessing the potential of Brain Capital through foreign remittances. According to the International Monetary Fund (IMF), remittances represent household income from foreign economies arising mainly from people’s temporary or permanent movement to those economies. Remittances include cash and non-cash items that flow through formal channels such as electronic wire, or through informal channels such as money or goods carried across borders. Making a case for effective harnessing of Nigeria’s diaspora remittances, the PwC study compared the contribution of oil sales (income, net of cost) and total remittances to the economy over some years. While oil revenue was $5.97 billion, $2.12 billion and $7.19 billion in 2019; 2020 and 2021, respectively, remittances on the other hand totaled $23.8 billion; $17.2 billion and $21 billion, respectively in those years.
In sum, the PwC study said: “When we look at the net oil performance side by side with remittances, we can see more clearly that Nigerian brains working in the diaspora contribute more to the economy than oil. In addition to the trends reshaping the global human capital value chain, Nigerians have shown they can consistently generate significant cash flow from foreign economies. Nigeria can continue to grow its forex cash flow by inserting more citizens into GVCs.”
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