Tuesday, October 20, 2020 / 08:53 AM / by FBNQuest Research / Header Image Credit: Devex
From
the CBN's latest Quarterly Statistical Bulletin we see that net current
transfers in the balance of payments (BoP) slumped by 32.1% y/y to US$3.9bn in
Q2 2020, and by 36.4% q/q. The comparable figures for net workers' remittances,
which comprise about 85% of net transfers, were 42.2% and 40.1%. In mid-April
the World Bank suggested that the decline for emerging and frontier states due
to the virus could be around 20% on an annual basis: in Kenya remittances have
held up well, and in Pakistan and Bangladesh they have increased.
Net current transfers in Nigeria in Q2 2020 were the lowest for at least
12 years. In the last domestic recession that spanned for five quarters from Q1
2016, the decline was modest because the remitting countries were still
growing.
This time the recession is near-universal. The five countries that are
the largest sources of remittances to Nigeria (US, UK, Germany, Italy and
Canada) are forecast to contract by between -4% (US) and -11% (Canada) this
year according to the IMF's latest World Economic Outlook., released
last week. The household budgets of the huge Nigerian diaspora have come under
enormous pressure.
The national lockdowns in most advanced economies may have been a
marginal factor although most remitting parties surely transact online rather
than walking down to the local branch of Western Union.
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Current transfers and portfolio
investment (net; US$ bn)
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Sources:
CBN; FBNQuest Capital Research |
Their
sharp fall in the quarter notwithstanding, net transfers in Q2 2020 were still
far more important in financing terms in the BoP than net foreign portfolio
investment (FPI; outflow of US$80m) or net FDI (US$520m). Other than the
occasional surge in FPI such as Q1 2019 (see chart), this has been the case for
many years.
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