18, 2021 / 03:00 PM / by CSL Research / Header Image Credit: World Bank
A World Bank report states that diaspora remittances to Sub-Saharan Africa (SSA) declined by 12.5% to US$42bn in 2020. The multilateral institution attributed the fall in remittances to the decline in the remittances to Nigeria as the country contributes 40% of the total remittances into the region. Excluding Nigeria, remittances into the region increased by 2.3% to N25.2bn in 2020. Countries such as Zambia (+37%), Mozambique (+16%), Kenya (+9%) and Ghana (+5%) reported an increase in remittances. Specifically, Nigeria recorded a decline of 27.7% to US$16.8bn in diaspora remittances. The World Bank also forecasted Sub-Saharan Africa to grow by 2.6% in 2021 supported by improving prospects for growth in high-income countries in the region.
Remittances into Nigeria constitute a major part of our foreign earnings. However, due to the high fees and lower rates associated with payments through official channels, many of these remittances do not pass through official channels. Currently, there is a premium of c.17.6% between the parallel market and the I&E window. As a policy response, the Central Bank of Nigeria (CBN) on 30 November 2020, directed all IMTOs to pay funds to beneficiaries of diaspora remittances in foreign currency (US Dollars) as against the erstwhile Naira payment aimed at reducing pressure on the FX parallel market. Early March 2021, the CBN extended the Naira 4 Dollar scheme which was expected to stimulate remittance inflows into the country through official sources. Noticeably, the exchange rate at the parallel market improved slightly following these directives. Nevertheless, Pressure persists in the FX market.
Looking ahead, we expect growth in remittances into the country on the back of continued efforts made by the government and gradual recovery in the global economy. The advent of the covid-19 pandemic and its impact on the global economy significantly impacted the inflow of remittances into the country in 2020. As employment gradually improves and consumer purchasing power strengthens, we expect remittance inflow to also grow. The country's total direct remittance inflow has averaged US$21bn in the past 10 years. This reflects the high level of migration within this period linked to several reasons. In the last year, migration of skilled workers has been on the rise and ignoring the devastating impact on the economy, should continue to support remittance inflow.