Friday, December 06, 2019 / 10:31 AM / by FBNQuest Research / Header
Image Credit: Libertex
Net current transfers declined by 2% y/y to US$5.93bn in Q2 2019, and by 22% q/q. This steep fall was the result of net other transfers of US$1.59bn in Q1 (see below), which item had been negative every quarter back to Q1 2008.
It balanced the widening of the trade surplus, resulting in a flattish deficit on the current account. Net workers' remittances improved marginally from US$5.85bn in Q1 to US$5.92bn. They generally peak in the fourth quarter to coincide with the Christmas holiday season.
The trend for remittances has been broadly positive since the CBN's exchange-rate reforms of March/April 2017. New and cheaper mobile-based methods of transfer should underpin the trend.
Net workers' remittances in Q2 were a larger inflow on the balance-of-payments than either net foreign portfolio investment of US$4.45bn or net FDI of just US$0.53bn. This has been the case for at least four years.
Given the scale of these remittances, a federal or even a state government strategy for the diaspora would be welcome. India and its Kerala state offer examples. In line with the CBN's heterodox foreign-exchange policies, a preferential rate would be one possibility.
Current transfers and portfolio investment (net; US$ bn)
Sources: CBN; FBNQuest Capital Research
The CBN is spearheading an initiative on remittances among African central banks, and will shortly start the data collection. The agenda is to ask recipients the size and the end-use of the remittance. Currently, such information is only available anecdotally.
The other transfer in Q1 was a financing scheme, we assume from a development agency and probably for the health sector, in favour of NPISH (non-profit institutions serving households).