White-collar workers in Canada, UK to drive Nigeria remittances growth

Nigeria’s diaspora remittances are expected to reach $22 billion by 2021, representing a 12 percent rise compared to $19.7 billion in 2016.

This is according to Agusto &Co. Limited, a foremost rating agency, which also estimated a marginal rise of 2 percent in 2022 to $22.5 billion.

Remittances are funds transferred from migrants to their home country. It represents household income from foreign economies arising mainly from the temporary or permanent movement of people to those economies.

Remittances play important roles in the economy, helping to meet the basic needs of recipients

The growth would be driven by two factors; one is an increase in the emigration of white-collar workers particularly to Canada, the United Kingdom, and Australia.

The second growth driver is that the Central Bank will maintain its currency policy all through 2021 and into 2022, which requires Money Transfer Operators (MTOs) to pay beneficiaries in foreign currency and not in naira.

Nigeria’s diaspora remittances fell by 12 percent to $21 billion in 2020 from about $23.8 billion the prior year.

On November 30, 2020, the CBN said in a circular that beneficiaries of remittance flows through an international money transfer organisation (IMTO) shall only receive such inflows in foreign currency (US dollars) through any bank of their choice.

However Agusto & Co. noted some risks to its forecast, which include economic effects of the COVID-19 pandemic, policy changes by the Central Bank, high remittance costs, and stringent financial regulations.

Presenting a new report on ‘2021 Nigeria Diaspora Remittance Report & Survey’, via zoom, Jimi Ogbobine, head of Consulting at Agusto Consulting, a pan-African credit rating agency noted that Nigeria recorded the worst contractions amongst Africa’s top 7 in 2020 of about 11.9 percent.

The report stated that all of Africa’s top 7 diaspora recipients experienced dips in remittance inflows in 2020 barring Kenya alone which grew by 2.8 percent.

“Nigeria’s domestic policy conundrum on foreign exchange creating as many challenges to the wider macro contractions caused by the pandemic,” Ogbobine said.

The COVID-19 pandemic has created significant global economic ruptures that have affected the rich world and the remittance-dependent states.

Outside Nigeria and Kenya, the other states within the top 7 bracket experienced varying degrees of contraction in diaspora remittances of between 5 percent to 9.4 percent in 2020.

Due to the crude oil volatility, the diaspora remittances which have long been Nigeria’s second-largest source of foreign exchange inflows have become more significant, said.

Ogbobine outlined four significant upsides that could lead to favourable outcomes in 2021, which includes the Central Bank’s decision to enable recipients of remittances access to funds in foreign currency, fiscal stimulus packages aimed at protecting wages and consumer spending in some of the major western nations (UK and US), currency depreciation in Nigeria, and the increasing rate of emigration by well-educated Nigerians particularly white-collar workers to Canada.

Globally, he said last year the global remittances market did about 7 percent to $666 billion from $716 billion in 2019. The interesting thing was that 2018 into 2019 did show some significant growth about 8 percent but he saw a dip, from 2016 global remittances have been growing steadily since 2016, about 8 percent on average. Then 2019 into 2020, there was a noticeable dip as a result of one major factor – Covid-19 pandemic.

Among the world top remittances in 2019 and 2020, India was the largest of about $82 billion in 2019, about $78 billion in 2020, even China, which was relatively recovered from the economic hardship of Covid-19 still suffered the material dip of about $70 billion to $59 billion over 2019 and 2020.

Amongst the world’s top six recipients of global remittances, only Mexico appreciated year-on-year from $39 billion to about $41 billion in 2020. The other countries experienced dips, the Philippines, Egypt, and Nigeria.

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