A new report by the World Bank at the weekend said Nigerians in diaspora remitted a total of $19bn in 2016, making it one of the top six receivers for the period; down from previous year’s $21bn.
The decline was blamed on the fall in oil prices, resulting in tighter capital controls and a “managed” exchange rate policy, resulting in large black market premiums in the foreign exchange markets, which diverted a large part of formal remittances to informal channels.
According to the latest edition of the Migration and Development Brief, released during the just concluded Spring Meetings of the World Bank Group over the weekend, however noted that remittances to developing countries fell for a second consecutive year in 2016, a trend not seen in three decades.
The report estimates that officially recorded remittances to developing countries amounted to $429bn in the period under review, a 2.4% decline from the $440bn in reported in 2015, while global remittances, including flows to high-income countries, contracted by 1.2% to $575bn, from $582 billion in 2015.
A breakdown of the remittance inflow to developing countries showed that the Asian continent dominated with seven of the 10 countries, only Nigeria and Egypt are African nations, while Mexico in South America.
The country fell behind India, which occupied the number slot with $62.7bnl followed by China with $61bn; followed from afar by $29.9bn by citizens of the Philippines abroad. Mexico and Pakistan were among the top five with $28.5bn; and $19.8bn respectively; while Nigeria was followed by Egypt’s $16.6bn; Bangladesh, $13.7b; and Vietnam, $13.4bn; while Indonesia, another Asian country made the top 10 table with $9.2bn.
Like Nigeria, many large remittance-receiving countries saw sharp declines in flows, with India also leading the decline shedding 8.9% from $68.9bn in 2015; behind the 11.1% drop by Bangladesh; 10% by Nigeria; and Egypt, -9.5%.
There were however exceptions such as Mexico and the Philippines, which saw inflows increase by an estimated 8.8% and 4.9%, respectively, last year.
According to Rita Ramalho, Acting Director of the World Bank’s Global Indicators Group, “remittances are an important source of income for millions of families in developing countries. As such, a weakening of remittance flows can have a serious impact on the ability of families to get health care, education or proper nutrition.”
However, in terms of remittances as a percentage of national GDP, Kyrgyz Republic took the lead with 34.5%; followed by Nepal, 29.7%; Liberia, 29.6%; Haiti, 27.8%, just like Tonga. Tajikistan recorded a remittance-GDP of 26.9%; Moldova, 21.7%; Comoros, 21.2%; The Gambia, 20.4%; and Honduras, 18.4%.
In Africa, Nigeria has the highest of estimated remittance as percentage of GDP of 19% in 2016; far above the 2% of Ghana and Senegal; Kenya, 1.7%; Uganda, 1.1%; and Mali, 0.8%; among others.
Meanwhile, following the firming up of oil prices and improvement in global economic activities projected for 2017, remittances to Sub-Saharan Africa are projected to increase by 3.3%; while inflow to Nigeria to increase by 1.9%; followed by Ghana, the second largest recipient in the region, which is expected to receive 3.1% more remittances; ahead of the 2.6% projected for Senegal
Africa has the highest average remittance costs, increasing from 9.7% in 2016 Q1 to 9.8% in 2017 Q1 (World Bank 2017), with some of the most expensive corridors being intraregional, such as Angola to Namibia (27%), South Africa to Botswana (21%), and Nigeria to Mali (20%), an indication “that a lot of effort will be required to bring transaction costs below 3 percent with no corridor above 5 percent, as envisaged in the
SDGs.”
Remittances to developing countries are expected to recover this year, growing by an estimated 3.3% to $444bn this year, in line with an improved global economic outlook.
The global average cost of sending $200 remained flat at 7.45 percent in the first quarter of 2017, although this was significantly higher than the Sustainable Development Goal (SDG) target of 3%. Sub-Saharan Africa, with an average cost of 9.8%, remains the highest-cost region. A major barrier to reducing remittance costs is de-risking by international banks, when they close the bank accounts of money transfer operators, in order to cope with the high regulatory burden aimed at reducing money laundering and financial crime. This has posed a major challenge to the provision and cost of remittance services to certain regions.