Thursday, August 22, 2019 /02:09PM / By PwC Nigeria / Header Image
Official records indicate that there are 1.24 million migrants from Nigeria in the diaspora (United Nations, 2017). This figure is likely to be higher in 2018 and 2019 with the recent trend in migration from the country. Almost half of Nigerian adults have indicated their willingness to leave the country in the next five years, according to a 2018 survey conducted by the Pew Research Centre.
Consequently, Nigeria accounts for over a third of migrant remittance flows to Sub-Saharan Africa. PwC estimated that these flows amounted to US$23.63 billion (2017: US$22 billion) in 2018, and represented 6.1% of Nigeria's GDP.
The 2018 migrant remittances translates to 83% of the Federal Government budget in 2018 and 11 times the FDI flows in the same period.
Nigeria's remittance inflows was also 7.4 times larger than the net official development assistance (foreign aid) received in 2017 of US$3.4 billion.
PwC estimates that migrant remittances to Nigeria could grow to US$25.5bn, US$29.8bn and US$34.8bn in 2019, 2021 and 2023 respectively. Over a 15-year period, PwC expects total remittance flows to Nigeria to grow by almost double in size from US$18.37 billion in 2009 to US$34.89 billion in 2023.
The growth in remittances is subject to global economic forces, which could spur or hinder growth of remittance flows, Other factors that will drive remittance flows include growth in emigration rate, economic conditions of the resident countries and the economic fundamentals in the Nigerian economy. The World Bank forecasts global growth to slow to 2.6% in 2019.
According to the IMF, remittances represent household income from foreign economies arising mainly from the temporary or permanent movement of people to those economies. Remittances include cash and noncash items that flow through formal channels such as electronic wire, or through informal channels, such as money or goods carried across borders. The importance of remittances is in the role they play in economies.
They help poorer recipients meet basic needs, fund cash and non-cash investments, finance education, foster new businesses, service debt and essentially, drive economic growth. Empirical studies show that the primary benefits of remittances to recipient households is the improvement in their general welfare. According to analysts, 70% of remittances are used for consumption purposes, while 30% of remittance funds go to investment related uses.
Global Remittances and Trends
The World Bank estimated that global remittances grew by 10% to $689 billion (2017: $633 billion) in 2018, with developing countries receiving 77% or $528 billion of the total inflows. India, China, Mexico, the Philippines and Egypt are among the largest remittance recipients globally, collectively accounting for approximately 36% of total inflows. The official recorded remittances are much lower than the actual remittances that take place through official and unofficial channels.
Remittances through informal channels could add at least 50% to the globally recorded flows (World Bank, 2006, ibid. 85). Freund and Spatafora (2005) estimate informal remittances to amount to between 35 and 75% of officially recorded flows. The SSA region received a small share of the global remittances in 2018, with Nigeria accounting for over a third of regional inflows. Despite representing a small percentage of global flows, official remittances to Sub-Saharan Africa grew by 10% to $46 billion in 2018. The World Bank also projects remittances to the region will grow by 4.2% in 2019, due to a moderation in global growth.
According to the International Monetary Fund (IMF), remittances sent to SSA through informal channels, at 45 to 65% of formal flows, are significantly higher than in other regions. Overall, remittance flows are anticipated to keep expanding as a result of two factors: projected strong regional economic growth in 2019 and large intra-regional migration flows from the SSA region. It is therefore imperative that countries in the region, especially Nigeria, take advantage of this trend in the course of strategic economic decision-making.
Remittances Flow to Africa
Egypt and Nigeria account for the largest inflows of remittances into Africa in 2018. In 2017, Nigeria led the Continent in terms of remittance receipts but dropped to second place behind Egypt in 2018. There are two main reasons behind this growth. First, global economic growth, especially in high-income OECD countries. The World Bank Migration and Development Brief attributes the rebound experienced in the global remittance industry to economic growth in Europe, the Russian Federation and the United States. Second, there was a rise in oil prices, which boosted economic activities in oil-producing countries worldwide.
Nigerian Diaspora, Remittances and Contributions to National Development
For four consecutive years, official remittances have exceeded Nigeria's oil revenues
Since many transactions are unrecorded or take place through informal channels, the actual amount of remittance flows into the country is arguably higher. In 2018, migrant remittances to Nigeria equaled US$25 billion, representing 6.1% of GDP. This also represents 14% year-on-year growth from the $22 billion receipt in 2017. The 2018 figure translates to 83% of the Federal Government budget in 2018 and 11 times the FDI flows in the same period. Nigeria's remittance inflows was also 7 times larger than the net official development assistance (foreign aid) received in 2017 (US$3.4 billion.)
Recognising the strategic importance of the Nigerian diaspora, the Federal Government signed the the Nigerians in Diaspora Commission Establishment Bill into law in July 2017. The Law established the Nigerians in Diaspora Commission (NiDCOM), which was set up to engage and utilise the human, capital and material resources of this demography in the socio-economic, cultural and political development of Nigeria. Abike Dabiri-Erewa was appointed as the first chairman and chief executive officer of the Commission. In 2019, the Federal Government went a step further by recognising July 25 of every year as National diaspora day.
Credit: The post Strength From Abroad: The Economic Power of Nigerians in Diaspora first appeared in PwC Nigeria on August 15, 2019
This report has been republished with the permission of PwC Nigeria.