Pan-African credit rating agency, Agusto & Co has projected that Nigeria’s diaspora remittances will reach $22 billion by 2021, representing a year-on-year (y-o-y) rise of five per cent. The Lagos-based firm stated this in its “2021 Nigeria Diaspora Remittance Report & Survey,” presented to members of the public.
The report anticipated a further y-o-y rise of two per cent in remittances inflow to $22.5 billion by 2022. According to the report, Nigeria’s diaspora remittances dropped by 12 per cent to $21 billion in 2020, from about $23.8 billion the prior year.
Head of Research at Agusto Consulting, Mr. Jimi Ogbobine, while speaking during a webinar on the report, explained that the Nigerian diaspora remittances is still an under-researched subject despite its strong bankability credentials.
He said there have been very few target-market studies on diaspora remittances in Nigeria, adding that Agusto Consulting adopted a strategy by initiating research on bankable markets with poor research coverage. Remittances are funds transferred from migrants to their home country. They represent household income from foreign economies arising mainly from the temporary or permanent movement of people to those economies.
Remittances play important roles in the economy, helping to meet the basic needs of recipients, fund cash and non-cash investments, finance education, foster new businesses, service debts and drive economic growth. “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 explained. He pointed out that Africa’s estimated migrant remittances of $78.3 billion in 2020 represented a modest 12 per cent of the global migrant 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,” it added.
According to the report, all of Africa’s top seven diaspora recipients experienced dips in remittance inflows in 2020, barring Kenya alone which grew by 2.8 per cent. It revealed that Nigeria recorded the worst contractions amongst Africa’s top seven in 2020 of about 11.9 per cent.
“Nigeria’s domestic policy conundrum on foreign exchange creating as much 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 of between five per cent to 9.4 per cent in 2020,” it added.
Diaspora remittances to Africa declined by an estimated 12.5 per cent in 2020 to $42 billion, almost entirely due to a 27.7 per cent decline to Nigeria, which accounts for over 40 per cent of such flows to the region, the World Bank recently disclosed. The Bank, in its latest Migration and Development Brief, revealed that excluding Nigeria, remittance flows to Africa increased by 2.3 per cent with a 37 per cent growth reported in Zambia, Mozambique (16 per cent), Kenya (9 per cent) and Ghana (5 per cent).
It stated: “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 percent 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 percent. Remittance growth was reported in Zambia (37 percent), Mozambique (16 per cent), Kenya (9 per cent) and Ghana (5 per cent).” In 2021, remittance flows to the region are projected to rise by 2.6 per cent, supported by improving prospects for growth in high-income countries.
The report noted that data on remittance flows to Sub-Saharan Africa are sparse and of uneven quality, with some countries still using the outdated Fourth IMF Balance of Payments Manual rather than the Sixth, while several other countries do not report data at all. Giving further insight, the report said: “High-frequency phone surveys in some countries reported decreases in remittances for a large percentage of households even while recorded remittances reported by official sources report increases in flows.
“The shift from informal to formal channels due to the closure of borders explains in part the increase in the volume of remittances recorded by central banks.” On remittance costs, the report stated that Sub-Saharan Africa remains the most expensive region to send money to, where sending $200 costs an average of 8.2 per cent in the fourth quarter of 2020.