In Sub-Saharan Africa, Nigeria emerged as a significant beneficiary of diaspora remittances, accounting for around 35% of all inflows in 2023.
This is based on a World Bank analysis of remittances received worldwide in 2023 and projections of inflows for 2024.
According to the data, Nigeria saw the largest inflow of $19.5 billion in the region last year.
“The expansion in the region Strong remittance growth in Uganda (15% to $1.4 billion), Rwanda (9.3% to $0.5 billion), Kenya (2.6% to $4.2 billion), and Tanzania (4% to $0.7 billion) drove remittances in 2023.
“Remittances to Nigeria fell by 2.9% to $19.5 billion, making up approximately 35% of total remittance inflows to the region,” the report stated.
Remittances are also received by Ghana and Kenya, which account for $4.6 billion and $4.2 billion in inflows, respectively.
Sudan and South Africa, who receive a combined $1 billion in remittances, are at the bottom of the list of the top 10 recipients of these inflows.
The survey also shows that in nations like the Gambia, Lesotho, Comoros, Liberia, and Cabo Verde, remittances from the diaspora account for one-fifth of the GDP. These influxes are crucial to the economic growth of these countries.
Inflow of Diaspora into Nigeria
The research states that Nigeria receives $19.5 billion in inflows from its diaspora, a 2.9% decrease from the year prior.
Despite being the largest in Sub-Saharan Africa, this percentage is insignificant when compared to nations with sizable diaspora populations, such India, which got around $119 billion during the same time period.
The survey also reveals that the majority of these remittances originated in the United States, Canada, the United Kingdom, Switzerland, and Italy.
It’s also crucial to remember that, when compared to other locations, Sub-Saharan Africa has the highest average remittance costs at 7.9%.
These remittance expenses comprise, among other things, payments for stamp duties, bank fees, and the money transfer operator’s portion.
Only 10% reach the legitimate FX market
Even while remittances from the Nigerian diaspora greatly increase the amount of foreign exchange liquidity that enters the nation, only roughly 10% of all remittances are thought to wind up in the official foreign exchange market.
The majority of these remittances, in the opinion of Taiwo Oyedele, the chairman of the presidential tax reforms, do not enter the official foreign exchange market and do not increase the market’s FX liquidity.
According to Oyedele, the majority of the money was externalized through digital transactions from foreign nations.
He claims that the inability of the Nigerian foreign exchange market to handle these remittances has made the market even less liquid.
“The World Bank estimated that our diaspora remittances would total almost $20 billion in 2023. According to our estimates, almost 90% of that was not received by Nigeria. It was externalising them.”
“We’ve talked to several Nigerians practically everywhere, and they told us about their current money-sending practices. They make use of digital apps. The list of those apps is here. They make advantage of rates from parallel markets. Thus, they give Naira credit here in Nigeria without bringing in US cash,” Oyedele added.
CBN’s actions
Yemi Cardoso, the governor of the Central Bank of Nigeria (CBN), stated in a recent interview that the committee was established by the apex bank to encourage greater input of cash from the diaspora into the official foreign exchange market.
He said that the committee’s only goal, which was to double the amount of foreign cash received from the international monetary operations (IMTO), was to report directly to him.
He claims that with more Nigerians in the diaspora joining the committee, beneficial results are starting to appear.
“We’ve recognized the significant role that Nigerian diasporans play in remitting large sums of money into the system over time.”
In order to double the amount of foreign exchange inflow from the IMTO, who service that section of the market – the independent players – we established a committee that answers directly to me, Cardoso stated.
It’s interesting to note that several of the CBN’s reforms to increase remittance inflow into the nation are also acknowledged in the World Bank report.
“By implementing operational changes in the Nigerian Foreign Exchange Market, the Central Bank of Nigeria (CBN) has begun to unify the foreign exchange market windows.”
The report states, “The CBN has also outlined new operational modalities for commercial banks, international money transfer operators, and Bureau de Change operators.”
Things To Note
Even with the massive influx of foreign cash brought in by Nigerians abroad, the nation continues to face severe liquidity issues in its foreign exchange market.
This is because there is a formalised structure in place to record these inflows in the official foreign exchange market, which could help reduce the currency volatility that has led to the naira’s decline.
In order to help boost liquidity and stabilise the Naira, the CBN said it is trying to make sure these remittances are brought into the system.
Given the volume of money entering the nation, diaspora remittances could eventually represent the largest foreign exchange inflow, bringing in more money for Nigeria than crude oil exports.
