Inflows of diaspora remittances into the country registered an upward movement in the first half of 2021. According to Nigeria’s balance of payment account disclosed recently by the Central Bank of Nigeria, remittances climbed to $9.3 billion in H1 2021, a 15 per cent rise from the $7.9 billion recorded in H2 of 2020.
This upward trend also represents a 3.2 per cent increase over the $9 billion recorded in the same period in 2020.
The increase in diaspora cash inflows into the country comes as the central bank continues its Naira4dollar campaign, which gives recipients N5 for every dollar they receive from approved IMTOs and commercial banks.
The apex bank authorities initiated this policy in March 2021. Following its huge success in the following months, the apex bank announced an indefinite extension of the policy in May with a bid to increase remittances and strengthen external reserves.
Remittances into the country still bear the adverse effects of the pandemic and are yet to reach full recovery. However, they are beginning to improve in comparison to 2020.
Just like every other country, the global economic slowdown brought on by the COVID-19 pandemic marred Nigeria’s financial standing and remittance figures. However, notably, diaspora inflows into the country reached a new high in H1 2021, surpassing those of 2020.
The recent surge in diaspora remittances has also helped to stabilize Nigeria’s current account balance, which has been in a net deficit since Q1 of 2021.
Nigeria’s current account deficit, on the other hand, decreased to $424 million in the second quarter of 2021, from $2.1 billion in the previous quarter.
According to the Central Bank’s figures, Nigeria has received $115.15 billion in diaspora remittances over the last five years, while outflows were $1.18 billion, resulting in a net credit of $113.96 billion.
Nigeria’s diaspora remittance outflow fell by 30.1 per cent in the first half of 2021, from $34.59 million in H2 2020 to $24.18 million. It also showed a minor decrease of 10.6% when compared to the $21.86 million reported in the same quarter of 2020.
The significance of Diaspora remittances
Foreign or diaspora remittances are the phrases used to describe the household income received from relatives, friends, and people living abroad.
The International Monetary Fund (IMF) describes these inflows as cash and non-monetary things that move through legal channels such as electronic wires or through informal channels such as money or goods carried across borders.
Remittances “assist poorer receivers to meet basic requirements, fund cash and non-cash investments, pay education, promote new businesses, service debt, and ultimately, fuel economic growth,” according to research by the renowned accounting firm PWC Nigeria.
The National Bureau of Statistics (NBS) estimates that six out of every 100 Nigerian households get remittances from abroad. These families get an average of N84,741 in diaspora remittances, with 80% of the money going toward basic needs.
According to the World Bank, Nigeria received more remittances from the diaspora in 2015 than it did from oil, which accounts for over 50% of government revenue and 80% of Nigeria’s foreign exchange revenues.
A global surge in remittances
According to World Bank data, global remittances increased by 10% in 2018 to $689 billion from $633 billion in 2017, with poor countries receiving 77% of total inflows, or $528 billion.
According to the World Bank, remittances to developing countries increased by 4.9 per cent in 2019 to $554 billion. Nigeria and 47 other Sub-Saharan African countries increased their trade by 4.3 per cent to $48 billion in 2019, up from $46 billion in 2018.
The expansion in Nigerian diaspora remittances was fueled by the Central Bank of Nigeria’s (CBN) series of foreign exchange reforms, which included the licensing of an extra 65 International Money Transfer Operators (IMTOs) in 2016.
Sub-Saharan Africa’s largest recipient
The World Bank’s remittance flow register shows that Nigeria, the region’s largest recipient of diaspora remittances, is experiencing a moderate rebound in remittance flows.
This is in part due to the increasing influence of policies intended to channel inflows through the banking system.
The World Bank, however, pointed out that the reported remittances are official records and are lower than total inflow figures through formal and informal routes. According to bank research, remittances through unofficial routes could account for at least half of all global flows.
Based on the figure for 2018, this corresponds to around $7.5 billion in additional remittances for Nigeria.
This indicates a significant foreign exchange leakage with substantial repercussions for the economy, particularly at a time when crude oil earnings, which account for over 80% of the country’s foreign exchange earnings, are dropping.
The World Bank anticipates that diaspora remittances to Nigeria will drop by $2 billion as a result of COVID-19’s negative economic effects, particularly in the nations where the money originates.
Nigerian cryptocurrency trading, on the other hand, has continued to grow, raising the question of whether remittances have truly decreased that much, or if much of the money has been diverted through greater cryptocurrency trades, thus evading official records.