Migrant remittances to Nigeria are estimated to hit $25.5 billion this year and $34.8 billion in 2023. According to experts, these huge, but untapped remittances have opened a fresh vista of opportunity for federal and state governments to finance large scale infrastructural projects. The funds’ reservoir can also be tapped to generate capital for productive investments in small and micro-enterprises, which will, in turn, create jobs, if a coherent policy framework to capture and properly channel the burgeoning remittances is put in place. Assistant Editor CHIKODI OKEREOCHA reports.
A fresh window of opportunity may have been opened for Nigeria to finance large-scale infrastructural projects and generate the much-needed capital for productive investments in small and micro-enterprises, which will, in turn, create jobs.
The country’s expanding migrant remittance inflows have created a large reservoir of funds which the federal and state governments can tap into to close the huge infrastructure gap in the country, fund cash and non-cash investments, foster new businesses, service debt and drive economic growth.
Currently, Nigeria accounts for over a third of migrant remittance flows to sub-Saharan Africa. PricewaterhouseCoopers (PwC) estimated that these inflows amounted to $23 million in 2018, and represented 5.8 per cent of Nigeria’s Gross Domestic Product (GDP).
The inflow was $22 million in 2017, with PwC stating that the 2018 migrant remittances translate to 77.2 per cent of the Federal Government budget in 2018 and 10.1 times the Foreign Direct Investment (FDI) inflows in the same period.
PwC in its latest White Paper Series titled, Strength from abroad: The economic power of Nigeria’s Diaspora, also said Nigeria’s remittance inflows was 6.8 times larger than the net official development assistance (foreign aid) received in 2018, which stood at $3.4 billion.
It also estimated that migrant remittances to Nigeria could grow to $25.5 billion this year, and $29.8 billion and $34.8 billion in 2021 and 2023.
Partner & Chief Economist at PwC Dr. Andrew S. Nevin said the report was an analysis, which showed the critical importance of the diaspora to Nigeria’s economy. He said PwC was keen to see the federal and state governments start to engage the diaspora, as the primary benefit of remittances to recipient households is the improvement in their welfare.
Nevin said, for instance, that studies showed that 70 per cent of remittances are consumed, while 30 per cent go to investment-related uses. “”So, it is important that Nigeria has a diaspora strategy at the national and state levels,” he stated in the report made available to The Nation, last week.
According to the report, Egypt and Nigeria accounted for the largest inflows of remittances into Africa in 2018. In 2017, however, Nigeria led the continent in terms of remittance receipts, but dropped to second place behind Egypt in 2018.
The report, which underscored the contribution of diaspora remittances to national development, was emphatic that for four consecutive years, official remittances exceeded Nigeria’s oil revenues. This means that Nigeria’s buoyant migrant remittance market could be the wedge for a country in search of life without oil.
According to the International Monetary Fund (IMF), remittances represent household income from foreign economies arising mainly from the temporary or permanent movement of people to those economies.
Remittances include cash and non-cash items that flow through formal channels such as electronic wire, or through informal channels, such as money or goods carried across borders.
These cash and non-cash items, according to PwC’s report, have been on the increase, even to the extent of dislodging oil revenues. And they are bound to continue increasing, with unofficial reports, stating that there are about 15 million Nigerians in the diaspora.
The report said this figure is likely to be higher in 2018 and 2019 with the recent trend in migration from the country. Almost half of Nigerian adults have indicated their willingness to leave the country in the next five years, according to a 2018 survey conducted by the Pew Research Centre.
According to findings from the survey, 45 per cent of adults reveal that they plan to emigrate from the country in the period stated above. This is the highest share among the 12 countries surveyed across four continents.
Govt aware of opportunities in the diaspora space
The strategic importance of the Nigerian diaspora is not lost on government especially the Federal Government. This was why it signed the Nigerians in Diaspora Commission Establishment Bill into law in July 2017. The law established the Nigerians in Diaspora Commission (NiDCOM), with Abike Dabiri-Erewa as the first Chairman and Chief Executive Officer.
The Commission was charged with engaging and utilising the human, capital and material resources of Nigeria’s diaspora population, which unofficial reports put at about 15 million, in the socio-economic, cultural and political development of Nigeria. It also went a notch higher in the year when it recognised July 25 of every year as National Diaspora Day.
Economic impact of remittances justify recognition
Several global studies have established the direct impact of remittances on the overall economy, as well as the consumption and investment of households in developing countries including Nigeria. For instance, findings from a report by the United Nations Conference on Trade and Development (UNCTAD) show that for every $2 billion in remittances that entered Mexico, production in the economy increased by over $6.5 billion.
Also, nearly 30 per cent of remittances are said to have been used for the purpose of investment and construction of houses in Ghana.
Similarly, a survey of 1, 526 Egyptian migrants showed that even though the results differ for literate and illiterate migrants, two factors – time spent working abroad and total amount of money saved abroad – have positive and signiûcant effect on the likelihood of migrants becoming entrepreneurs upon return to the home country.
Experts also say that favourable exchange rate shocks (i.e. more remittances income as a result of favourable exchange rate shocks) increases the investment of remittances receiving household in entrepreneurial activities speciûcally in transportation, communication and manufacturing enterprises.
The PwC report said overall, remittance inflows are anticipated to keep expanding as a result of two factors: projected strong regional economic growth in 2019 and large intra-regional migration inflows from the Sub-Saharan Africa (SSA) region.
“It is, therefore, imperative that countries in the region, especially Nigeria, take advantage of this trend in the course of strategic economic decision-making” the report co-authored by PwC Manager Omomia Omosomi recommended.
To maximise opportunities in migrant remittances
According to development experts, remittances can have a strong impact on development, both at the macro and micro- level, especially as it has a multiplier effect on consumption, investment and economic growth.
The PwC report, however, said in order to ensure that remittances are utilised in ways that are beneûcial to the economy, there is need to create platforms that increase accessibility of crucial information for Nigerians in the diaspora.
The report pointed out that the Nigerian diaspora constitutes mainly semi-skilled, skilled and highly skilled professionals who are in need of credible opportunities of investment with assured returns on their savings and earnings.
“A platform where information on opportunities can be shared will help reduce information asymmetry when it comes to investment opportunities.
“Also, it is strategically important for state governments to also adopt these platforms to drive and attract remittance infows from migrant indigenes toward consumption, investment and development in their respective sub-nationals,” it said.
PwC also recommended encouraging and creating pooled investment vehicles. “One of the major barriers to investing for those in the diaspora is the minimum amount of funds, which investing firms accept, it observed.
The report, therefore, advised that “Pooled investment vehicles where members of diaspora can be vetted and can aggregate funds for private equity investment for example, would encourage greater investments.”
It also noted that early-stage businesses with smaller financing needs present a great opportunity for those in the diaspora to invest through angel networks, adding that facilitating these investment options in Small and Medium-scale Enterprises (SMEs), joint ventures and micro-credits become pragmatic and viable opportunities for the diaspora.
The report stated that such efforts will also encourage employment-generating activities, reduce further emigration and save workers from exploitative conditions abroad by providing them alternative livelihood options in their own country.
Cost of remittances still a sore point
The PwC report said the global average cost of sending $200 was 7.1 per cent in the first quarter of 2018, more than twice as high as the Sustainable Development Goal (SDG) 10 target of reducing the transaction costs of migrant remittances to less than three per cent.
According to the report, Sub-Saharan Africa remains the most expensive place to send money to, where the average cost is 9.4 per cent (about 25 per cent higher there than in the rest of the world).
It however, said these costs have been decreasing over the last 10 years, partly because of the rise of mobile money technology. Today, mobile money transfers are two times less expensive than money transfer operators and post ofûces, and almost three times less costly than transfers through commercial banks.
“As mobile money technology continues to expand, and its coverage and usage continue to increase across SSA, it is expected to contribute to an increase in remittance inflows. Several countries across the globe, including Nigeria, have developed plans towards attracting investment from their diaspora community for national development,” the report said.
As buoyant as Nigeria’s migrant remittance market is, official statistics probably greatly underestimate its size, as the statistics are not likely to include illegal immigrants.
Besides, experts say Nigeria’s diaspora remittance market comes under the “undocumented economy” where reliable data is hardly captured by the Central Bank of Nigeria (CBN) and other statistics/data-capturing agencies.
These must be why the PwC report said what is required to fully tap into Nigeria’s burgeoning remittance inflow is a coherent policy framework to harness remittances into generating capital for productive investments for the growth and development of SMEs, which will in turn, create employment. It will also help deploy remittances into fixing the nation’s decrepit infrastructure such as schools, hospitals, roads etc.
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