Early in the month, CBN Governor Godwin Emefiele announced a new directive that allows all recipients of remittances to collect their funds in dollars. The directive is aimed at creating a more attractive environment that encourages Nigerians abroad to wire money home. This comes at the wake of dollar shortages and declining value of the naira currently trading at N500/US$ in the parallel market.
In recent times, remittances have declined from $5 billion a quarter to about $3.38 billion a quarter. This is partly due to the global recession deriving from the impact of Covid-19 and also due to the worsening business climate in our country.
During the past decade, remittances have risen spectacularly. They have risen from $18 billion in 2009 to $23.63 billion in 2017, before declining to $17.5 billion in 2019. In the last three years, remittances have averaged 83 percent of the FGN budget, 10 times the FDI inflows and 7.4 times of ODA.
There is an estimated population of 1.24 million Nigerians living abroad, many of them highly skilled professionals. It is a well-known fact that Nigerians are the single most educated emigrant group in the United States. They have a median income of $68,658, which is well above the national median of $61,937.
Diaspora Nigerians are not only a source of cash. They are a reservoir of ideas, knowledge, skills, competencies and global networks for trade and investments
There is no doubting that remittances can contribute positively to collective welfare and long-term economic growth. Studies by the UN Conference on Trade and Development (UNCTAD) show a positive correlation between remittance inflows and long-term development. For an emerging economy such as Mexico, it has been revealed that, for every $2 billion of remittances, production in the overall economy increased by $6.5 billion. In Ghana, it was found that remittances contributed to 30 percent of the country’s construction boom. Evidence from Egypt and the Philippines show remittance-receiving households spent more on investment-related activities than on mere consumption. Evidence from 6post-communist East European countries (Albania, Bulgaria, Macedonia, Moldova, Romania and Bosnia Herzegovina) shows a significant correlation between remittances and economic growth. Research by the UN Economic and Social Commission for Asia also showed that remittances have a way of smoothing consumption and easing capital constraints. But the Asian study cautions that remittances should not be placed at par with the traditional growth engines such as exports, FDI and innovation.
I welcome the new CBN directive. But I worry about the inadequacy of our public discourse on the subject. Diaspora Nigerians are not only a source of cash. They are a reservoir of ideas, knowledge, skills, competencies and global networks for trade and investments.
Last year, Senate confirmed Abike Dabiri-Erewa as Chairman/CEO of the newly created Diaspora Commission. In June 2017, the Diaspora Bond at a coupon rate of 5.625 percent was announced. It was oversubscribed by 130 percent. Some $300 million was raised from that single issuance. There is evidently more potential to tap into that source of investment funding for national development.
But there are challenges. Some Diaspora Nigerians have been involved in large-scale online financial scams. It led to agencies such as Western Union temporarily suspending their operations in our country. Our national image remains a big liability. When you look at it from the viewpoint of country risk premiums, our poor image is costing us billions of dollars of lost revenue.
There is also the fact that transfer costs still remain prohibitive. About a decade ago, the cost of transferring $200 dollars was as high as 15 percent. It has gone down to about 10 percent on average. But this still substantially above the target of 3 percent that international experts believe to be the most sustainable. It is self-evident that the high costs of wiring funds are a discouraging factor. If the costs were drastically reduced, we would witness massive increases in capital flows. It would also mean more money coming into the beneficiary countries.
There is also what I term “the Other Diaspora”. Our focus has been too much on Nigerian Diaspora. As far back as 2003, the African Union opened a Department for Diaspora Affairs at its headquarters in Addis Ababa. They define the African Diaspora as all peoples of African origin living outside the continent who have both a desire and willingness to engage with the Mother Continent and to contribute positively to its collective development.
The remarkable economic strides that have been made in countries such as China, India and Israel owe in part to the ability of those countries to tap into their Diaspora potentials. When Deng Xiaoping was embarking upon his ambitious programme of modernisation, he made it a strategic objective to tap into the Chinese Asian Diaspora, who together controlled more than $1 trillion in assets. The same is true of India and Israel. As a matter of fact, Israel has the Law of Return in its constitution. It accords the right of return, known as Aliyah, to all people who can prove that they are bona fide Jews. It has resulted in massive influxes of capital into Israel.
Ghana has copied that model with great success. President Nana Akufo-Addo proclaimed 2019 as the Year of Return in Ghana. That year commemorated 400 years since the first slave set foot in the United States of America. The scheme encourages the black Diaspora to visit Ghana for tourism as well as business. They are also easing the procedures for those who want to emigrate. It has done a lot of good for the national image of the country and has brought in almost $3 billion in additional capital inflows.
From where I stand, we are only scratching the surface. Our manifest destiny is to be the guardian and symbol of Africa and the Black race. There are almost 1 billion people of African origin scattered across the Americas, Europe and the islands of the seas. All of them look to Nigeria for leadership. We are their only beacon of hope in a benighted world.
