• Friday, February 23, 2024
businessday logo


Turning diaspora remittances from consumption and social support to investments

Turning diaspora remittances from consumption and social support to investments


I thank you sincerely for inviting me to speak on the contribution of the Nigerian Diaspora to economic development in Nigeria. This topic is crucial and timely, seeing that the number of Nigerian diaspora keeps increasing by the day and just like in the 80s, there is now a ‘japa’ movement in Nigeria where economic and social conditions have so deteriorated that the brightest of Nigerian youth and professionals identify success both academically and professionally with leaving the country.

There is huge controversy over the population of Nigerians in the diaspora. While the United Nations Department of Economic and Social Affairs put Nigeria’s Diaspora population at 1.7 million in 2020, Reuters news agency, citing money transfer service Western Union data, put the Nigerian diaspora population at 5 million. However, Abike Dabiri-Erewa, head of the Nigerians in Diaspora Commission, in 2017, gave the number of Nigerians living abroad as 15 million. Two years later, in 2019, she claimed the number had increased to 20 million – even though she did not elaborate how the commission or the government came about this number.

Regardless, the number of the Nigerian diaspora has been increasing astronomically over the last five years due to the criminal destruction of the Nigerian economy, the unusually high level of unemployment (33% and youth unemployment at almost 60%), and the destruction of education and our universities.

A sprinkling of Nigerians went to study in European and American universities in the colonial era with very few staying back in those countries to work and start families. The majority returned to Nigeria to take up jobs in the vastly expanding federal, state, and public services in desperate need of skilled Nigerians to take over from the departing colonial administrators and also in the burgeoning Nigerian private sector.

I must state that the actual figure of remittance inflow into Nigeria is much higher since many transactions are unrecorded or take place through informal channels

That trend largely continued after independence such that by the early 1980s, Nigeria had a secure and flourishing middle class living comparatively better than even their peers in developed countries and had no need to think of leaving the country. High school graduates were assured of decent jobs and both the public and private sector jostled to recruit graduates from our universities with entry level positions entitled to cars. Keith Richards, a former CEO of Guinness, John Holt, Promasidor and many other multinational companies in Nigeria, in an article in BusinessDay of 27th February 2016, presented the picture more eloquently:

“When I first visited Nigeria in 1981, there was still a fairly robust middle class. It had been impacted by the turmoil of the Civil War and subsequent military governments but was still visible, resident in places like Yaba, parts of Surulere, Palm Grove in Lagos and often in GRA’s around the country. Professionals were relatively financially secure. Doctors, teachers, professors were still respected. Their salaries, not yet decimated by the devaluation of the Naira in the mid 80’s, were generally paid on time. Universities had slipped from earlier standards but still offered a solid education. Government colleges were still functioning. Socially, there were cinemas in most cities, Lagos had a smattering of decent restaurants and social clubs were still prestigious and smart.”

Read also: $20b Nigerian diaspora remittances, four times FDI investments in 2021 – Buhari

But then the military struck on December 31, 1983, and things were never the same again. Beyond economics alone, the destruction of the middle class was also psychological. In their bid to prevent intelligent debate and criticism, the military regimes with no exception implemented policies to whittle down the autonomy of universities and economically dis-empower both staff and students, compromised the quality of the civil service and shackled civil society. The effect on academia was particularly severe and it marked the collapse of the Nigerian university system. Professors and solid academics were knocked off their perch, struggling to survive like every poor Nigerian and unable to afford any of the luxuries they were used to. Most of the solid academics left for foreign universities leaving behind mostly the dregs of the system who could not hope to function outside of the dysfunctional Nigerian system.

As Richards attests, “Many of Nigeria’s best minds went into exile. Gradually those who had the opportunity to move abroad, the professional middle class, did so. By the time democracy resumed some 68,000 Nigerian Doctors were practicing in the USA and the UK had 18,000 Nigerian health professionals in the NHS. The brightest of our students studied overseas and stayed to work and raise families.”

The rehabilitation of the middle class really began around 2003 when the Obasanjo administration realised it could do with the expertise of Nigerians and professional economic managers to reform the economy. By 2010, Nigeria had again a bubbling middle class driving the economy. What was more, many Nigerian organisations were actively recruiting Nigerians and foreigners abroad offering them competitive wages. Some Nigerian professionals in exile and the diaspora and their families started coming back to take opportunities emerging in the country.

Things were looking so bright for the middle class until 2015 when Buhari returned, this time, as a civilian president. Sadly, his coming coincided with the collapse of the Naira, economic depression and stagflation. In just a year, all the progress made by the middle class came crashing: the devaluation of the Naira and hyperinflation had wiped away their earnings, and, all of a sudden, they are back to square one, scrambling for survival like everyone else. And just like in the 1980s and 90s, they started leaving in droves. Those with second passports, or permanent residencies outside the country quickly checked out while those with the means are doing everything in their power to check out as well. Canada became a favourite destination for the middle class and professionals because they could easily get permanent residency and within three years citizenship. But, over the last two years, just any other country with better educational and job opportunities will do as hopelessness takes hold.

But enough of history. Let us look at the economic importance of Nigeria’s burgeoning diaspora population to the country. According to data from the World Bank, diaspora remittances to Nigeria through official channels in 2017 was $22 billion; $23.63 billion in 2018 and $23.81 billion in 2019. Due to the Covid-19 pandemic, it reduced to $17.21 billion in 2020 but rose again to $19.2 billion in 2021. I must state that the actual figure of remittance inflow into Nigeria is much higher since many transactions are unrecorded or take place through informal channels. Diaspora remittances was estimated to grow to $25.5bn, $29.8bn and $34.8bn in 2019, 2021 and 2023, respectively, but the Central Bank of Nigeria got ahead of itself.

Diaspora remittances is 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. Since 2015, diaspora remittances have outstripped oil revenues in Nigeria.

To be continued next week

Being the 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.