• Wednesday, May 22, 2024
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BusinessDay

The global politics of remittances

Doing what we have to do: Are we hurting or helping the poor?

Most people who grow up in Nigeria realise very early on that they come from a third world country, and thus develop a de-facto immunity to the crappy treatment that comes with the territory. When these people leave Nigeria and experience discrimination, they have one of two responses.

They either swallow it quietly and without protest because they feel like there isn’t much of a country to back them up if they talk back (which is true), or they flip it around and laugh heartily in the face of whoever is trying it on them. After all what mistreatment or discrimination at the hands of oyinbo can top the mistreatment and discrimination they face back home?

I was one of the few who did not fall into the “most” category, on account of being born inside a cocoon hidden inside a shell, wrapped up in swaddling clothes behind a shield protected by a bulletproof one-way window somewhere in Lagos. Given these highfalutin circumstances and expectations, it took quite a number of years before the proverbial penny began to drop.

It didn’t drop in fact, until my second year at university in the UK when I got a call from a friend at a university back home. Apparently, she needed to either pay a lecturer N20,000 or sleep with him before she would be allowed to graduate, so she was calling to see if I could help out with some money.

The only way to make it worth it was to significantly bump up the reward, hence the fact of me paying £15 to send just £100. The overall message that came through clearly was: This world does not like poverty, poor people or poor countries

Price gouging and poor treatment

As it happened, I actually had roughly £100 to spare, which was that amount plus some change back in 2010. (Weren’t those the good old days of £1 – N200!) I confidently walked into my local Western Union and informed them that I would be sending £100 to Nigeria, and this was where I began to comprehend the reality of how the world worked and the disadvantage of coming from where I came from.

First of all, it cost about £15 to send £100. It is impossible to think of any service that sends money to a developed country that would require a hefty 15 percent service fee, but that is what happened.

Apart from the price gouging, it also became clear that there were two tiers of treatment for people who came in to use the same remittance services. People sending more to the 1st world didn’t generally use Western Union anyway, because their regular retail banks made the process of sending money from the UK to the U.S. as simple as that of doing a N5,000 transfer from GTB to Access Bank.

Those sending money to Eastern Europe via Western Union and other tier 2 remittance services got the best treatment they could muster. Those sending to Asian countries like Pakistan and Bangladesh got significantly less courteous service. Those sending to Africa were right at the bottom of the treatment and priority scale.

Punishment for being poor

As I later got to understand, this had more to do with the business reality of sending to the respective locations than simply racism and prejudice, although those things were certainly a factor. In fact, the lack of proper KYC and AML enforcement by banks in third world countries, coupled with increased operational risk of doing business there, thanks to state interference and market distortion made it such that they would much rather not do business with Africa and the third world anyway. To compensate for the difficult reality of doing business in Africa, they used price gouging to even out their losses.

As I dug into the operational reality of global remittances later, I began to grasp two significant points. 1.) The regulatory strength and effectiveness of a jurisdiction has a direct inverse correlation to the price of sending money to that jurisdiction. 2.) Nobody wants to send money to a poor jurisdiction because it is high risk, low reward.

The only way to make it worth it was to significantly bump up the reward, hence the fact of me paying £15 to send just £100. The overall message that came through clearly was: This world does not like poverty, poor people or poor countries. The poorer you are, the more the global financial system will punish you for it.

So ultimately as with so many other things in Nigeria, the solution to exploitation at the hands of remittance services is for Nigeria to stop being poor.

Fat chance of that happening