Tuesday, April 21, 2020 / 09:25 AM / By FBNQuest
Research / Header Image Credit: National Daily
From
the latest balance of payments (BoP) from the CBN we see that net current
transfers increased by 10.7% y/y to US$7.0bn in Q4 2019, and by 16.9% q/q. Net
workers' remittances generally account for more than 90% of net transfers. They
peak in the fourth quarter to coincide with the Christmas holiday season, an
exception being Q1 2019 due to a sizeable inflow from a development
agency. We see from our chart that transfers exceeded portfolio investment
each quarter except one over the past four years. They are, however, now
vulnerable to the pandemic.
In
aggregate, remittances to lower and middle income countries have exceeded
official aid by a factor of three since the 1990s. In Nigeria in 2019 they
totaled US$23.5bn net, compared with US$9.0bn in foreign portfolio investment
(FPI) and a derisory US$1.8bn in foreign direct investment.
World Bank
statistics have remittances to sub-Saharan Africa rising by 10.1% in 2018 and
5.1% in 2019. Its forecast of further increases from US$49bn to US$51bn this
year, and US$54bn in 2021 now look very hopeful.
In the
latest BoP there have been substantial revisions to data for FPI in 2018 and
2019. We now have a record net inflow of US$14.4bn in Q1 2019, when there was a
brief surge into debt securities after the presidential election. We also have
net outflows in Q3 and Q4, which are consistent with the start of the exit from
OMO bills and other short-term paper.
Current transfers and portfolio
investment (net; US$ bn) |
|
Sources:
CBN; FBNQuest Capital Research |
Nigeria is the sixth largest recipient of remittances globally and the
second in Africa (after Egypt). The recession now widely forecast for this year
suggests a painful squeeze on remitting households. The five countries that are
the largest sources of remittances to Nigeria (US, UK, Germany, Italy and
Canada) are all forecast to contract by at least -5% this year according to the
IMF's new World Economic Outlook.
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