Slump in Workers' Remittances in Q2 2020

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Tuesday, October 20, 2020 / 08:53 AM / by FBNQuest Research / Header Image Credit: Devex

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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.


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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