Diaspora remittances hit $23bn, overtake oil revenues

Diaspora remittances into Nigeria are expected to overtake oil sale proceeds for the first time ever, this year, leading economist and CEO of Financial Derivatives Company, Bismarck Rewane says.

Rewane estimates that while the government portion of oil export proceeds will average about $21bn in 2016, the value of diaspora remittances in the same period will hit $23bn-$24bn.

Speaking to BusinessDay, Rewane said, “You just need to look at the numbers. We project total sale from oil of around $44bn but when you strip off joint venture portion and cost of producing the oil, Nigeria’s take will probably be around $21bn this year and estimates point to diaspora remittance coming in at between $23bn and $24bn.”

According to the economist, the good part of this is that our export of people and knowledge is fetching Nigeria more foreign exchange than the export of crude oil.

“Indians have done this to their advantage for decades and now other countries like the Philippines and Israel are following closely behind India,” Rewane explained.

He said there was an implication for policy makers in government in the light of the emerging trend.

What these countries have done and are continuing to do is to offer attractive incentives to their people in the diaspora to send money home and this could include improved rates of exchange directed at diaspora remittances, flawless transfer mechanisms, attractive investment vehicles targeted at Nigerians abroad.

Diaspora remittances had slowed down in the run up to the second half of the year, when Nigeria sought to defend the ailing naira against the greenback, but with the unpopular policy out of the way, following the currency float on June 20, “Nigerians in diaspora may be tempted to send money home, now that they can get fair value and may want to take advantage of the fact that the naira has plunged by more than half,” said Kyari Bukar, chairman of the Nigeria Economic Summit Group (NESG), in response to questions.

Sub-Saharan Africa saw a modest growth of 1 percent in remittances in 2015, compared to 0.2 percent in 2014, and the World Bank forecasts remittances to the region to spike 3.4 percent, to $36 billion in 2016, from $35.2 billion in the preceding year.

“Depending on the assumption, remittances may outpace oil proceeds this year, given that there have been significant crude output cuts,” Bukar added.

Slightly contrary to the sustained line of thought, Sewa Wusu, head of research at investment and advisory firm, SCM Capital Ltd, says the outlook for diaspora remittances may falter.

“It’s only a projection and it may not happen,” said  Wusu.

“This is because currently, we are witnessing Brexit and the impact of that will affect diaspora inflow. If people lose their jobs as a result of Britain leaving the European Union, it will be difficult to send money home,” said Wusu in an emailed response to questions.

According to the World Bank remittance report, the top two sources for Nigerian Diaspora remittances in 2015 were the United States ($5.7 billion) and the United Kingdom ($3.7 billion).

“We have over one million Nigerians in the United Kingdom,” Muda Yusuf, director-general of the Lagos Chamber of Commerce and Industry (LCCI), said by phone.

“Nigeria is a major recipient of Diaspora remittances in Africa. Therefore, the unfolding scenario of Brexit may have some adverse implications for remittances to Nigerians from the UK.”

Remittances from Nigerians living abroad hit $20.77 billion in 2015, making Nigeria the sixth largest recipient of remittances in the world, according to the World Bank’s Migration and Remittances Factbook 2016.

The oil-producing Niger delta slid back into turmoil in February, with profound ramifications for both oil income and national cohesion in Nigeria.

Despite claims by government of oil production levels getting back to as high as 1.9 million barrels per day, independent estimates put the level at a mere 1.4m with most of the production coming from production sharing contracts from which government take is the lowest.

The latest insurgent group to emerge from the region, the Avengers- as it is known; has succeeded in cutting oil production by between a quarter and a third for much of this year.

This is the latest iteration of a conflict that has flared regularly for 20 years, as militants demand a greater share of revenues for the region that produces the oil. Its consequences, however, are graver than in the past. In a low price environment, Nigeria can no longer rely on oil to supply two-thirds of government revenue. The country needs every drop now, while it makes the transition to a more productive economy, less dependent on crude.

Africa’s largest economy is already in the midst of its worst crisis in generations. The treasury has lost half its revenues to the falling price. Further cuts as a result of oil production losses threaten the viability of the state, raising questions not only about the government’s ability to finance infrastructure plans but also to afford salaries.

BALA AUGIE & LOLADE AKINMURELE