International flows of migrant remittances to Nigeria, a significant source of economic support for Africa’s most populous country, suffered a 12.18 percent decline in 2020 amid the impact of the COVID-19 pandemic.
From the $23.8 billion reported in 2019, diaspora remittances into Nigeria dropped by $2.9 billion to $20.9 billion last year, according to data by The Economist Intelligence Unit.
“Recessions in host countries have made it difficult for migrants to send money home, as they face increasing precarity and unemployment,” research analysts at The Economist said.
The drop in remittances spells trouble for a country Nigeria which has already been hit hard by the global economic recession. Although Africa’s largest economy exited recession in the fourth quarter of 2020, its full-year GDP growth of -1.92 percent was lower than the average 2.6 percent population growth rate, meaning a majority of its citizens are still in recession.
From receiving over N5million from her elder sister in Spain in 2019, a middle-aged businesswoman who simply identified herself as Osato and resides in Benin City, the capital of Edo State, told BusinessDay by phone that her sister was only able to send about N2 million in 2020.
“Things were hard last year, my sister was not able to send much to us. While we were worried about her health because of the high transmission rate of the virus in Europe we were also worried due to money issues as she wasn’t able to send home enough money.” Osato said, adding that her sister’s housing project was also put on hold.
Read Also: Nigeria sees herd-immunity pick up without COVID-19 vaccines
The World Bank estimates that global remittances fell by 7 percent in 2020, surpassing the 5 percent decline seen during the global financial crisis in 2009. Owing to the pandemic’s lingering effects on the global economy, The Economist expects a further 7 percent drop in global remittances in 2021.
“The fall in remittances, and their expected continued decline in 2021, present significant challenges for these countries—particularly if their reliance on remittances grows in the immediate term,” the Economist said.
Analysis of the data by The economist shows that the decline in Nigeria’s diaspora remittances in 2020 was almost twice the 8percent decline in Egypt and even worse as the World Bank’s data analyzed by the London-based organization shows there were improvements in Mexico, Pakistan and Bangladesh by 4 percent, 9 percent and 8percent, respectively.
While many developing countries rely on remittances as a source of external financing that now eclipses overseas development assistance and even foreign direct investment (FDI), The economist said a significant drop in remittances represents bad news for a country like Nigeria as it risks further delay in its economic recovery while increasing the likelihood of balance-of-payments issues and placing new pressures on the naira.
Estimates by a local consulting firm, Agusto & Co. puts Nigeria’s balance of payment deficit in 2020 at $9bn, the biggest imbalance in at least seven years.
That would be the largest outflow from the country’s external reserves since at least 2014, a key factor responsible for the three currency devaluation undertaken by the central bank last.
To deepen Nigeria’s foreign exchange market and bridge the gap between the official exchange rate and the parallel market rate, the central bank of Nigeria issued a circular late last year geared towards eliminating a barrier to diaspora inflow.
With the new CBN policy, beneficiaries of diaspora remittances will be able to receive the dollar flow and thus, will be able to get better rates for their money.
According to the CBN, the Circulars were issued to liberalise, simplify and improve the receipt and administration of diaspora remittances into Nigeria. It was also stated that the clarifications and amendments are aimed at stabilising and deepening the foreign exchange market, providing more liquidity, and creating transparency, especially in the administration of diaspora remittances into Nigeria.
The move by the CBN was largely due to the dollar shortage in the country resulting from the drop in oil prices and oil production cuts coordinated by OPEC.
Meanwhile, BusinessDay, plans to engage stakeholders through its forthcoming ‘Diaspora Today’ event to stir up conversations on the way forward in deepening Nigeria foreign remittances.
With the title: ‘Gearing for growth: harnessing diaspora dynamism for domestic development’ the virtual event which is scheduled to hold on March 4 will bring together Nigerians in the diaspora, friends of Nigeria, Nigerian government officials, diplomats, researchers, persons intending to migrate, business owners, investors, financial institutions, civil society organisations, and international development partners to discuss and fashion more effective means to tap the knowledge, and economic resources as well as influence networks of Nigerians living in the diaspora as a significant complement to earnings from exports and tool for diplomacy.
With guest speakers like Abike Dabiri-Erewa, Chairman/CEO of Nigerian Diaspora Commission, Andrew S Nevin, partner/chief Economist, PwC Nigeria, and Patience Oniha, the DG of DMO, the event promises to also explore specific ways for individuals and/or groups resident overseas to make secure and sustainable investments that drive development back home.
Other objectives of the Discuss the design, development and options of diaspora-targeted and remittance event included discussing the design, development and options of diaspora-targeted and remittance-backed financial product
Identifying ways to transmit the success of individuals in the arts, culture and literature, entertainment, sports, academia, and the professions into a re-narrative of Brand Nigeria that counters negative perceptions of the country as a den of internet fraud, illegal migration, human trafficking, ethnic intolerance, and religious extremism is another area the event will be addressing.
Taking the pulse reading on the views of Nigerians in diaspora on the contemporary tripwire debates around topics like racism, Black
Lives Matter, colonialism, slavery, integration, the rise of far-right political strains in their countries of adoption is another objective the event wish to address.
