Remittance

World Bank report says officially recorded remittance flows to low- and middle-income countries reached 540 billion dollars in 2020, 1.6 per cent below the 2019 total of 548 billion dollars.

The report which is titled ‘Migration and Development Brief’ released in Washington D.C. on Wednesday provides updates on global trends in migration and remittances.

It said that in spite of COVID-19, remittance flows remained resilient in 2020, registering a smaller decline than previously projected.

“The decline in recorded remittance flows in 2020 was smaller than the one during the 2009 global financial crisis at 4.8 per cent.

“It was also far lower than the fall in Foreign Direct Investment (FDI) flows to low- and middle-income countries, which, excluding flows to China, fell by over 30 per cent in 2020.

“As a result, remittance flows to low- and middle-income countries surpassed the sum of FDI of 259 billion dollars and overseas development assistance of 179 billion dollars in 2020.”

The brief said that the main drivers for the steady flow included fiscal stimulus that resulted in better-than-expected economic conditions in host countries and a shift in flows from cash to digital and from informal to formal channels.

It added that cyclical movements in oil prices and currency exchange rates were also responsible.

According to it, the true size of remittances, which includes formal and informal flows, is believed to be larger than officially reported data, though the extent of the impact of COVID-19 on informal flows is unclear.

It also said that with global growth expected to rebound further in 2021 and 2022, remittance flows to low- and middle-income countries were expected to increase by 2.6 per cent to 553 billion dollars in 2021 and by 2.2 per cent to 565 billion dollars in 2022.

It said that the relatively strong performance of remittance flows during the COVID-19 crisis also highlighted the importance of timely availability of data.

“Given its growing significance as a source of external financing for low- and middle-income countries, there is a need for better collection of data on remittances, in terms of frequency, timely reporting and granularity by corridor and channel.”

Highlighting regions, it said that remittance inflows rose in Latin America and the Caribbean with a record of 6.5 per cent, South Asia 5.2 per cent and the Middle East and North Africa 2.3 per cent.

However, remittance flows fell for East Asia and the Pacific which recorded 7.9 per cent, while for Europe and Central Asia 9.7 per cent was recorded.

For Sub-Saharan Africa, it said that a 27.7 per cent decline in remittance flows to Nigeria in 2020 resulted in decline of remittances by 12.5 per cent to Sub-Saharan Africa to 42 billion dollars.

It said that Nigeria alone accounted for over 40 per cent of remittance flows to the region.

It however, said that excluding Nigeria, remittance flows to Sub-Saharan Africa increased by 2.3 per cent.

“Remittance growth was reported in Zambia at 37 per cent, Mozambique 16 per cent, Kenya nine per cent and Ghana five per cent.

“In 2021, remittance flows to the region are projected to rise by 2.6 per cent, supported by improving prospects for growth in high-income countries.”

The brief added that for remittance costs, the region remained the most expensive to send money to, where sending 200 dollars costs an average of 8.2 per cent in the fourth quarter of 2020.

It added that supporting the remittance infrastructure and keeping remittances flowing includes efforts to lower fees.

The World Bank also said it was assisting member states in monitoring the flow of remittances through various channels, the costs and convenience of sending money and regulations to protect financial integrity that affect remittance flows.

It added that it was working with the G20 countries and the global community to reduce remittance costs and improve financial inclusion for the poor.

It said that even as many high-income nations had made significant progress in vaccinating their populations, infections were still high in several large developing economies and the outlook for remittances remained uncertain.

Michal Rutkowski, Global Director of the Social Protection and Jobs Global Practice at the World Bank said that as COVID-19 still devastates families around the world, remittances continue to provide a critical lifeline for the poor and vulnerable.

“Supportive policy responses, together with national social protection systems, should continue to be inclusive of all communities, including migrants.”

Dilip Ratha, lead author of the report and head of the global Knowledge Partnership on Migration and Development (KNOMAD) said that the resilience of remittance flows was remarkable.

He added that remittances were helping to meet families’ increased need for livelihood support.

“They can no longer be treated as small change. The World Bank has been monitoring migration and remittance flows for nearly two decades and we are working with governments and partners to produce timely data and make remittance flows even more productive.

Tanko Mohammed

The Association of Bureau De Change Operators of Nigeria (ABCON) has said that a competitive Diaspora Remittance market space would engender Naira stability.

Alhaji Aminu Gwadabe, President, ABCON, made the assertion in an interview with the News Agency of Nigeria (NAN) in Lagos, against the backdrop of the recent CBN Naira for dollar policy issued on March 5.

Gwadabe lauded the apex bank’s policy, but said more needed to be done for the policy to achieve its intended objective of shoring up the value of the Naira through liquidity boost,

He said there was the need to break the monopoly of some certain players in the remittances space by allowing the participation of other stakeholders like BDCs in the realm of remittances.

According to him, Kenya, Ghana, South Africa, etc, have all deepened their remittance space through a heavy competitive market space.

The ABCON boss said that measures taken by the aforementioned countries had enabled them to achieve volumes, leading to the stability of their local currencies.

He said that the Naira for dollar measure was among the many recent strategies deployed by the CBN to attract more Diaspora remittances into the official channel and address the foreign exchange liquidity concerns in the market.

“There is no doubt the incentive will be somehow attractive to the targeted beneficiaries of the remittances and therefore aimed to address concerns of one of the principal ally in the chain of remittances,” Gwadabe said.

He said that statistics from the Nigerians in Diaspora Commission (NiDCOM) suggested that over 17 million Nigerians legally residing in the Diaspora remitted over 20 billion dollars in 2020 in spite of the COVID-19 pandemic.

“This therefore suggests that it is a window, if well-articulated and includes all the principal allies in the remittances space, will help the Nigerian economy for the availability of FX liquidity,” Gwadabe said.

CBN, in a circular dated March 5, 2021, directed all Deposit Money Banks and International Money Transfer Operators to henceforth pay recipients of diaspora remittances N5 for every USD received as remittance inflow.

The incentive, tagged “Naira 4 Dollar Scheme”, was announced in a circular signed by Saleh Jibrin, CBN ‘s Director, Trade and Exchange Department.

Jibrin said that the scheme, which would run from March 8 until May 8, would allow all recipients of diaspora remittances to be paid N5 for every one dollar received.

He said that beneficiaries would get the incentive, whether they collect the remitted dollars as cash across the counter or through their domiciliary accounts.

The director said all commercial banks and International Money Transfer Operators (IMTOs) should ensure that the scheme takes effect from March 8.

Shedding more light, CBN governor, Mr Godwin Emefiele, said the “Naira 4 Dollar Scheme’’ for diaspora remittances would enhance a transparent and more flexible remittance administration.

Emefiele said this in a series of tweets in CBN’s verified twitter handle.

He stated that the scheme would greatly enhance the benefits of diaspora remittances in supporting investments and economic growth in Nigeria.

He said that the scheme was consistent with the global trend, adding that the apex bank aspired to ensure that remittance flows and diaspora investments became a significant source of external financing.

`CBN strives to constantly improve our remittance infrastructure, ease the process of international money transfer and simplify the experience for senders and recipients.

“We believe this new measure will help to make the process of sending remittance through formal bank channels cheaper and more convenient for Nigerians in the diaspora.

“ The new policy will create an easier, more flexible, and more transparent, system of remittance administration, it will greatly enhance the benefits of diaspora remittances in supporting investments and growth in Nigeria,’’ he stated.

He said that the policy was aimed at reducing rent-seeking activities, and providing Nigerians in the diaspora with cheaper and more convenient ways of sending remittances to Nigeria.

Similar schemes, according to him, have helped boost economies of some countries across the world.

“The use of reimbursements of remittance fees has been critical in supporting improved inflow of remittances to countries in South Asia and in improving their balance of payments position following the COVID-19 pandemic.

“ PwC forecasts suggest that Nigeria’s remittance flows could reach US$34.89 billion by 2023. But this can only be accomplished if remittance infrastructure improves and if the right policies are put in place,’’ he said.