Sending money to Nigeria and other Sub-Saharan African (SSA) countries from the diaspora has become even more expensive in 2023, maintaining its position as the most expensive region for remittance, according to a World Bank report.
Sub-Saharan Africa continues to lead in remittance costs, with fees reaching up to 36% for every $200 sent from abroad. In a year-on-year analysis, there’s a slight increase in the average cost of sending $200 to sub-Saharan Africa, rising to 7.9% in Q2 2023 from 7.8% in the same period in 2022.
Globally, remittance costs remain high, exceeding 6.9%, with the Sustainable Development Goals (SDG) target set at 3% by 2030, according to the World Bank.
The report read:
- “Sub-Saharan Africa remains the region with the highest remittance costs. The average cost of sending $200 to the Sub-Saharan Africa region slightly increased, averaging 7.9% in 2023Q2 compared with 7.2% in 2022Q2. A stable price has been observed in remittance costs in the region since 2021, but this average remains far above the global average of 6.9% and the SDG target of 3% by 2030.”
High bank charges
Traditional banks significantly contribute to the high trajectory of remittance fees, being identified as the entities charging the highest costs.
The report noted:
- “Costs vary substantially across the region, ranging from 1.3–4.5% in the lowest cost corridors to 17–36% in the highest. For example, sending $200 in remittances from Tanzania to neighbouring Uganda would have cost a migrant 39.1% in 2023Q2.
- “Banks charge the highest costs, thus emphasizing the importance of cross-border mobile money transactions. In Kenya, Rwanda, Tanzania, and Uganda, such transactions are constrained by limited interoperability among telecom operators and money transfer operators.”
In Nigeria, recent reports suggest that Nigerian banks will impose an electronic money transfer levy on foreign currency inflows equivalent to N10,000 and above from January 2024. This is anticipated to worsen the high cost of remittance, potentially diverting more forex transactions to unofficial markets.
More Insights
- In response to challenges, the African Union (AU), in collaboration with central banks and the African Export-Import (Afrexim) Bank, initiated the Pan-African Payment and Settlement System (PAPSS). The system aims to facilitate direct transactions among the 40+ currencies used in the continent, with the hope of reducing the costs and complexities of foreign exchange for cross-border transactions between African markets.
- African countries such as Nigeria, Ghana, Kenya, Liberia, Guinea, Sierra Leone, The Gambia, Djibouti, Zimbabwe, and Zambia, have shown interest in the initiative.
- While efforts are underway to address remittance challenges, the persistently high costs underscore the need for continued interventions and collaborative initiatives to enhance the efficiency and affordability of remittance channels in SSA.
