A period of crisis like the COVID-19 pandemic is not the best time for countries to expect diaspora remittances. Although remittances were initially stalled by the pandemic, the World Bank report says the flows later rebounded to play crucial role in supporting economic activities across nations. The ‘Naira for Dollar’ initiative in Nigeria, Roshan Digital Account in Pakistan, or two per cent cash incentive in Bangladesh have yielded significant benefits to the countries, writes COLLINS NWEZE.
At the onset of the COVID-19 pandemic, funding and sending diaspora remittances became almost impossible for Nigerians abroad and citizens of other nations across the globe.
Job losses and severe curfews needed to curb the spread of the illness resulted in reduced incomes, restricted mobility, and disrupted operations of service providers in many countries.
Remittance services were not deemed essential, and many were forced to close. Even those who managed to continue providing services faced higher costs and unexpected expenses to meet the requirements of “the new normal.”
But the new World Bank report by Oya Ardic, Senior Financial Sector Specialist of the bank, says remittance flows later rebounded and have played a crucial role in supporting economic activities as countries developed new policies to keep them coming.
For example, the introduction of the Roshan Digital Account in Pakistan, the ‘Naira for Dollar’ initiative in Nigeria or the two per cent cash incentive in Bangladesh seems to have yielded benefits in the short run.
Central Bank of Nigeria (CBN) Governor, Godwin Emefiele said the bank’s ‘Naira for Dollar’ initiative gives N5 incentive for every $1 sent from the diaspora. The policy also means that the cost of transferring $1 is reduced by about N5.
The global bank report says the role of digital financial services in helping the remittance industry navigate through the disruptions and risks of the crisis underscores the importance for authorities and donors to prioritise legal reform and market interventions.
The report explained that in recognition of the important role that remittances play as an enabler of growth and prosperity, the World Bank inaugurated weekly pulse surveys and pricing analyses to monitor the situation in the international remittances market in April and May, last year, with the objective of identifying challenges and making recommendations to address the crisis.
Another contributor to the report, Senior Payment Systems Specialist, World Bank, Hemant Baijal, explained that despite the odds and initial projections, remittance flows rebounded quickly after a sharp decline at the start of the pandemic. By the end of last year, remittance flows were down by only 1.6 per cent globally from early in the year, far less than what was projected at the start of the pandemic, and less than the decline in volumes experienced during the financial crisis of 2008.
According to the World Bank, the resilience of remittance flows came as a result of migrants drawing on their savings to send money home, of shifting flows from unregulated channels, such as hand-carrying, to regulated remittance channels where accessible, and of migrants receiving cash transfers offered by host country governments where available.
The bank said despite the temporary rise on remittances’ costs that service providers experienced at the start of the COVID-19 crisis, these much-needed flows reached their recipients at reduced costs.
“The pandemic has fundamentally affected the way in which remittances are sent, the business models, the behaviour of remittance senders and receivers, their trust in the regulated financial institutions as well as their financial and digital literacy,” he said.
Similarly, countries with higher use levels of digital financial services saw bigger drops in remittance costs and smaller declines in service availability. Government initiatives to promote and incentivise the use of regulated financial services, particularly digital ones, have made a difference for some economies in boosting the inflow of remittances.
– The Nation