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Turning diaspora remittances from consumption and social support to investments (2)

Turning diaspora remittances from consumption and social support to investments (2)

Since 2015, diaspora remittances have been the highest source of foreign exchange to Nigeria and contribute more to Nigeria’s GDP than oil, and more than 11 times the total sum of Foreign Direct Investment (FDI) into the country.

How do we utilise this huge annual inflow into the country for economic development in Nigeria? Normally, countries that depend on diaspora remittances do have elaborate schemes to allow their diaspora citizens to send in money easily and cheaply and also establish secure investment schemes for them. For example, in countries such as Mexico and the Philippines, hometown associations (HTAs) make communal decisions about the investment of remittances. Mexican HTAs in the US, Europe and parts of East Asia alone number over 3,000, and Filipino groups may amount to 1,000.

Kenya, with diaspora remittances of less than $3 billion, is so worried that remittances are used mainly for consumption and social support that it officially decided to create investment schemes that resemble hedge funds. This is to channel Kenyan diaspora remittances towards a sustainable source of financing and capital for MSMEs and start-ups, and to drive job creation and enhance entrepreneurial capacity and opportunities.

Sadly, Nigeria has no such scheme and does not seem to be interested in creating any. You all should be familiar with how Nigerian government officials junket from country to country, claiming to chase after FDIs. Well, here they have potentially over $35 billion annually of FDIs from Nigerians exclusively and they are clueless or uninterested in what to do with it.

Rather, what they are interested in is finding ways to seize the dollars to augment Nigeria’s forex reserves. During the 2016 economic recession and as the scarcity of forex began to bite at home, the CBN set its sight on diaspora remittances, trying to forcefully collect the dollars being sent home by directing banks to convert it at official rates (N199/$ while the dollar was going for N360 at the parallel market) for recipients. It didn’t take long before Nigerians in the diaspora found other means of sending money home. This formed part of the reason the CBN purported to ban cryptocurrencies in Nigeria. Even with that, Nigerians have got wiser and with the high cost of sending dollars home, they have devised informal means of sending money home without it passing through official channels.

If Nigeria wants to truly harness the potentials of its diaspora for economic development, it could easily create pooled investment vehicles strictly in foreign currencies where members of the diaspora can be vetted and can aggregate funds for private equity investments. This would easily encourage greater investments and repatriation of funds home.

Also, if the government is interested, it could invest in the creation of technology to reduce the cost of sending money home. Currently, sub-Saharan Africa remains the most expensive place to send money to in the world, where the average cost is 9.4 percent (about 25% higher than in the rest of the world.) Kenyans have done that already. Nigeria can too if it is interested.

Until such a time we can get political leaders really interested in harnessing the potential of the Nigerian diaspora for economic growth and development, I would advise that as individuals, we should all find ways to turn the remittances we send home into investments rather than just for consumption and social support. Let me explain.

Read also: Turning diaspora remittances from consumption and social support to investments

I am not saying we should all set up businesses at home. Many have tried it and got their fingers burnt. Nigeria may not be a hospitable place for business right now and there seems to be a shortage of people with integrity to do business with. What I am saying is that we should ensure that the money or most of the money we send home is used strictly for investments in education, health, and career advancement of our family members rather than just for consumption.

For those of us whose parents are still alive, it is compulsory to take care of them. That is normal. But besides that, we should resist the temptation to send free money to young, healthy, and agile family members for consumption or for health. We are not helping them and we are only helping them to develop an unhealthy sense of entitlement and of being lazy.

A Nigerian in the US shared with me how he channels his funds to his family. He said he never sends free money to anyone. Of course, he pays for the school fees of his younger ones – and once they finish school, they must be productive. They subsequently must earn every dollar he sends them. They are either learning to code – and he sends them money with each step learnt to encourage them to learn more – or he is paying for professional exams for them (say the GRE or GMAT) needed to apply to gain admission and funding to foreign or US schools.

With such targeted investments, within a matter of few years, he completely established all his family members such that none of them needed his help any more. His decision went as far as healthcare. Every one of his family members was to compulsorily get health insurance in Nigeria. He would gladly contribute to his family members buying health insurance than constantly donating money for one healthcare problem or another.

This is the kind of model I propose. Nigerians are refusing to buy very cheap and accessible health insurance, claiming God is their insurance, only to turn around and flood the social media with Go Fund Me requests and “save a life” appeals just to treat routine medical conditions. We can lead the way in getting our family members to enrol in the scheme, which will ultimately strengthen the National Health Insurance Scheme at home and improve general healthcare and hospitals. We could use our remittances to compel our family members and relatives to become resourceful and to seek and acquire new skills and knowledge. There is no greater investment than investing in the human person.

Sending money for consumption and handouts does not help anyone. It only deepens our “saviour” complex and laziness and sense of entitlement on the recipients.

Being the concluding text of a keynote to the Nigerian-American Community Association, Montgomery, Alabama, on the commemoration of Nigeria’s 62nd independence anniversary on October 1, 2022.