VISA sees remittances topping $55bn in Nigeria by 2017

Remittances via money transfers in sub-Saharan African will grow exponentially to more than a hundred billion dollars by 2017 with Nigeria alone accounting for more than half of that, according to research by VISA, the global leader in card payments.

VISA research says more than $73 billion was sent via money transfers in the region in 2012 and it now projects growth at double digit rates over the next five years BusinessDay has learnt.

Analysts say this offers considerable opportunity for VISA, which benefits from remittance flows, disbursement flows and prepaid cards in the market. By 2017, Nigeria would account for $55.8bn in remittances, Kenya $27.5bn and South Africa $17.6bn according to VISA.

It estimates that remittances sent from outside Africa would be the fastest-growing market and expected to amount to $38bn by 2017 or 27 per cent of the total remittances market.

This would be an increase from $19bn in 2012 when this class made up 20 per cent of the total remittance market.

VISA has started work with banks and retailers in the continent to open more corridors for consumers to push remittances by lowering cost to them.

This followed by initiatives by both the World Bank and the Group of Eight to force down charges demanded by banks and money transfer operators to send remittances to and from Africa, as well as within the continent from an average of 12.4 per cent to only five per cent.

Remittance charges are even higher between African countries according to the World Bank.

It is estimated that an African diaspora will spend around $24 to send $200, almost double the global average according to research by UK think-tank, Overseas Development Institute, (ODI) which says that reducing remittance charges for Africans to the G8 target of five per cent would push transfers by a whopping $1.8bn annually.

The ODI said Africans in effect, are paying remittance “super tax”due to weak competition, the concentration of the market and flawed financial regulation in the continent.

Western Union and MoneyGram, two global money transfer giants account for two-thirds of remittance transfers but VISA has now launched a programme that seeks to crack the stranglehold of the giants by using a network of connecting banks across 200 countries to send money from one VISA card to another at a tenth of the price of the traditional players, according to Mandy Lamb, head of sub-Saharan Africa for VISA.

Speaking in Johannesburg, Lamb said consumers can now send money via cellphones, a bank branch, an ATM, internet banking or a point of sale machine at a retailer, in real time and Equity Bank in Kenya was the first sub-Saharan bank to launch the programme last year.

VISA says it is in the process of certifying a number of banks and retailers in Africa to allow them to offer remittance services and the new scheme should take off in South Africa before the end of this year.

“In South Africa, we have seen a great interest in banks wanting to offer remittances, as they have seen that it is lucrative for them and meets the World Bank requirements in terms of bringing down the costs of remittances,” Lamb said, adding that retailers are also interested in sending and receiving remittances as they have realised it is commercially viable for the lower end of the economy.

PATRICK ATUANYA