Thursday, July 16, 2015 8:45AM / FBN Capital Research
Remittances are the second largest source of foreign exchange inflows into Nigeria recorded in the balance of payments. On the basis of the CBN’s latest External Sector Development Report, current transfers amounted to US$21.9bn in 2014.
This compared with US$80.0bn for oil and gas exports, US$5.3bn for foreign portfolio investment, US$4.7bn for foreign direct investment and US$3.9bn for non-oil exports. (The figures for transfers and investment are unadjusted for outflows, which are modest in the case of transfers but sizeable for portfolio transactions.)
Current transfers could, to give just three destination points, finance housing construction, seasonal celebrations and/or import demand. For a number of reasons, we cannot be more precise.
The CBN data show that workers’ remittances accounted for more than 90% of current transfers. The balance consisted of general government transactions such as the local expenses of embassies and international organisations.
The remittance may be received by the beneficiary through a bank, at a bureau de change, at the local office of the money transfer corporation or through independent channels such as a mobile telephone. Some informed estimates place the share received through the banks as low as 25% of the total.
We do not envy the statistical authorities responsible. The data do not show a marked fall-off in transfers in 2008 and 2009 when the global credit event shook at least two of the countries where the Nigerian diaspora is well represented (the US and the UK.)
Hargeisa, the capital of unrecognized Somaliland, has been rebuilt in the past 25 years with remittances. Their impact is everywhere visible, In Nigeria, however, the transfers represented 3.7% of 2014 GDP and merely add to the grey areas in household consumption, imports and small-scale production.
Until bank accounts become more widespread and the tax net is extended, we will have to live with these frustrations.