Nigeria tops list of remittance flow

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March 07, 2007/BusinessDay

 

 

In absolute terms, Nigeria, Kenya, and Senegal are the largest recipients of remittances in the Sub-Saharan Africa (SSA) region which increased by 55 percent since year 2000.

 

This is contained in a recent working paper titled, ‘Impact of Remittances on Poverty and Financial Development in Sub-Saharan Africa’ recently released by the International Monetary Fund (IMF).

 

According to the paper, the flow of remittances into developing countries is attracting increasing attention because of their rising volume and their impact on the receiving countries.

 

\"In 2005, for instance they totalled $188billion—twice the amount of official assistance developing countries received. Moreover, there is evidence that such flows are underreported.

 

Remittances through informal channels could add at least 50 percent to the globally recorded flows\".

 

\"Since 2000, remittances to developing countries have increased on average by 15 percent in annual terms. Though at least some part of the growth is attributable to better reporting by recipient countries, it appears that over the last decade remittances have outpaced private capital flows and official development assistance\".

 

Remittances are perceived as being more stable than other external flows.

 

\"To the extent that migrants are motivated by altruism and send more money home in times of economic distress, remittances may actually be countercyclical. The stability of these inflows also opens up an opportunity for developing countries to lower borrowing costs in international capital markets by securitizing future flows of remittances\".

 

The Fund also noted: \"because remittance receipts are widely dispersed, they may not cause the real exchange rate to appreciate; they may also obviate the deleterious effect on home country institutions observed in short-lived natural resource booms\".

 

There are marked regional differences in remittance flows.

 

\"Since the 1980s, remittances to countries in Latin America, the Caribbean, and the East Asia and Pacific regions have grown more rapidly than the average for developing countries generally. In 2005, the top three recipients—China, India and Mexico—accounted for more than one-third of the remittances to developing countries.

 

Among the top 25 recipients of remittances, only one (Nigeria) is in\".

\"Studies using household-level data from individual countries in SSA have yielded some insights into how remittances are used at the micro level. At their core remittances are private, intra-community income transfers that directly address the single most relevant challenge for SSA—poverty\".

 

\"Sub-Saharan Africa has been part of the increasing global trend; remittances to SSA have increased by over 55 percent in United States dollar terms since 2000, while they increased for developing countries as a group by 81 percent. However, the recorded remittances are only a small fraction of total remittances to SSA\"

 

\"Relative to GDP, too, the volume of remittances to SSA is generally smaller than in other developing countries. On average remittances in the region are about 2.5 percent of GDP, compared to almost 5 percent for other developing countries. However, there are striking exceptions in SSA\", the papers noted.

 

\"Nigeria, Kenya, and Senegal are the largest recipients of remittances in the region.

 

For some countries, remittances are also an important source of foreign exchange. One reason remittances have attracted attention is that they are seen as more stable than other foreign currency flows to developing countries.

 

\"This is especially relevant to SSA, where official aid flows have fluctuated considerably from year to year. Remittances to SSA are not just consistently less volatile than official aid, they are also less volatile than Foreign Direct Investment (FDI), which is usually seen as the most stable private flow.

 

Since 1990 remittances have been procyclical, though less so than either official aid or export earnings. The low (though positive) correlation coefficient demonstrates the stability of remittances over time rather than any strong relationship to growth cycles\"

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