The latest statistics showed that Nigeria’s diaspora remittances were estimated at $25.08 billion in the year 2018.
According to the available reports obtained from the National Bureau of Statistics (NBS), remittances from Nigerians in Diaspora rose from $3.24 billion in 2013 to approximately $25.08 billion in 2018. This means Nigeria’s diaspora remittances rose by 126% in 6 years (2013-2018). Thus, over the last 6 years, Nigerians in Diaspora sent an estimated $96.5 billion to the country.
The Rising trend of Remittances inflow
In recent times, the inflow of diaspora’s remittances has been on the rise as more Nigerians who abandon the country in search of greener pastures abroad, send foreign currencies to their families. For instance, recent statistics showed that Nigeria ranks third in the rating of the countries with the highest number of Express Entry invitations to Canada in 2018.
- Further breakdown shows that Nigeria’s diaspora remittance inflow accounted for 5.74% of the country’s Gross Domestic Product.
- Specifically, in 2013, Nigeria’s remittance was put at 4.31% to Nigeria’s GDP, while in 2018 it stood at 5.74%.
- An earlier forecast by PricewaterhouseCoopers (PWC) shows that the total remittance inflow to Nigeria will grow by almost double from US$25.08 billion in 2018 to US$34.89 billion in 2023.
- This suggests that as more Nigerians desperately leave Nigeria for other countries, remittances inflow is expected to rise marginally.
- According to reports, Egypt and Nigeria accounted for the largest inflows of remittances in Africa in 2018.
Remittances edging out other financial flows
The Nigerian economy is internationally opened to several sources of financial flows which include export revenue, capital flows, remittances, Official Development Assistance (foreign aid), loans, grants and so on.
- Over the years, experts have argued that while other sources of financial flows to Nigeria have declined, inflows through remittances is the country’s new oil.
- Recently, the World Bank in a report stated that remittances have been stable during episodes of financial volatility when capital flows fell sharply. According to the World Bank, in the period of financial crisis, remittance-receiving countries with a more dispersed migrant population enjoy greater stabilising effect.
- A quick check into capital importation data shows that Foreign Direct Investment (FDI) which is a major component of Nigeria’s capital importation fell from $2.27 billion in 2014 to $1.19 billion in 2018. This means FDI inflows into Nigeria dropped by almost 90%.
- Similarly, the further breakdown shows Nigeria’s total capital importation (FDI, Portfolio Investment and other investments) dropped from $20.7 billion in 2014 to 16.8 billion in 2018.
- While other sources of foreign capital inflows have marginally dropped, remittance has instead been on the rise.
Recently questioning the country’s diaspora remittances in a recent report, renowned Economist, Henry Boyo alleged that commercial banks in the country in connivance with the Central Bank of Nigeria are ripping off Nigerians, thereby halting the growth and developmental effects of remittances inflow.
Analysing further, Henry Boyo noted that since the dollar that CBN supplies regularly to banks and over 3,000 Bureau-De-Change operators are derived from the foreign reserves and instead of Diaspora remittances, then diaspora remittances is simply an illusion as a national asset.
Also, Henry Boyo disclosed that thousands of Nigerian pensioners may have been robbed of over 20% of the real value of the dollars regularly remitted to them, as the banks pay remittances at the rate of $1 to N305, as against the prevailing N350-360 to $1 bureau-de-change rate as provided by the law. According to him, the almost $26bn of Diaspora remittances are warehoused abroad and do not supplement the size of the CBN’s regular dollar auctions.
Meanwhile, speaking extensively to Nairametrics, the Chief Economist for Businessday, Nonso Obikili (Ph.D.), stated that although remittances have been on a steady rise for over a decade, they are still a small fraction of the foreign exchange inflows.
“Remittances have been steady and rising slowly for over a decade but. They are still a small fraction of FX inflows. Crude oil is still the dominant source and so fluctuations in crude oil prices still have effects on the currency. This doesn’t mean that remittances have no effect but because they don’t fluctuate so you tend to not see those effects.
Speaking on the alleged rip-off of remittances’ recipients by banks, Dr. Nonso expressed a contrary view.
“There are a plethora of remittance companies now, from MoneyGram to TransferWise, so there is enough competition to ensure that one bank can’t really rip off people and get away with it, unless the customers don’t know they are being ripped off which they probably can because everyone can use a calculator. Right now the CBN sets the rate at which remittance companies must exchange their FX. I think its N355 or so.”
Reacting to why the rising remittances inflow is not easing off pressure on Nigeria’s external reserves, Nonso explained that remittances may not ease off pressure on the reserves.
“When someone sends you money from abroad, the bank does not have to carry those dollars to Nigeria to give you. They can credit you naira and then use those dollars to fulfill some other obligation there, like if someone wired money abroad for school fees for instance. That’s what financial intermediation is all about.
“We see from CBN’s balance of payments data that remittances are around $22 billion or so. It doesn’t mean that someone put $22 billion on a ship and sent it to Nigeria. It just means that there were $22 billion inflows officially. If there were also $22 billion outflows say by people paying school fees or importing stuff, then the banks just balance accounts without having to move money up and down. That’s financial intermediation. No fraud there.”
Over the years, it has been widely established that the officially recorded remittances into the country are much lower than the actual remittances that take place through unofficial channels. This means a larger chunk of Nigeria’s remittances flows through the unofficial channels.
Also, a report has shown that only 30% of remittances inflow into Nigeria go into investment-related purposes.
[READ FURTHER: Nigeria’s diaspora remittance to hit $34 billion by 2023 – PwC]
Hence, for the country to attract and benefit more from the positive spill-over effects of remittances inflow, the government (federal and state) must develop a holistic diaspora strategy that will improve the confidence of Nigerians abroad on the financial system and investment climate in the country.