Remittances to Nigeria and other African countries are expected to decrease by 5.4 percent from $44 billion in 2020 to a projected total of $41 billion in 2021, due to the effects of COVID-19 pandemic, according to findings of Continental Migration Report 2021.
The report titled, “African regional review of implementation of the Global Compact for Safe, Orderly and Regular Migration,” was produced by the Economic Commission for Africa (ECA) in partnership with the African Union Commission (AUC). It builds from four sub-regional reports compiled by AUC and a summary from stakeholder consultations at the just concluded 2021 African regional review meeting on the Global Compact for migration.
The World Bank had reported that remittances by Nigerians in diaspora fell by 27.7 per cent to $16.8 billion in 2020 from $23.24 billion.
The World Bank disclosed this in a report titled, ‘Migration and Development Brief’, which also revealed that remittance flows to low- and middle-income countries fell by 1.6 per cent to $540 billion in 2020 from $548 billion in 2019.
The report, which provided updates on global trends in migration and remittances, revealed that remittances to Sub-Saharan Africa fell by 12.5 per cent to $42 billion in 2020, with Nigeria accounting for 40 per cent of the remittances into the subcontinent. The report stated: “Remittances to Sub-Saharan Africa declined by an estimated 12.5 per cent in 2020 to $42 billion.
“The decline was almost entirely due to a 27.7 per cent decline in remittance flows to Nigeria, which alone accounted for over 40 per cent of remittance flows to the region.
Although the COVID-19 pandemic was expected to lead to a decrease in remittances to Africa in 2020, findings of the reports show that by October 2020 remittances to Africa had reached approximately $78.4 billion, constituting 11.7 per cent of global remittances. Remittances have therefore demonstrated greater resilience and reliability as a source of capital in Africa than foreign direct investment flows.
It recommends that governments across the world should take effective action to facilitate and boost remittances in view of supporting the fight against COVID-19 and ultimately building a more sustainable post-pandemic world.
According to the report, the costs associated with sending remittances to Africa are some of the highest in the world. Until very recently, average transaction costs were equivalent to 8.9 per cent of the amount being sent for a remittance payment of $200,
With respect to the cost of sending money, the report says Africa is still far from achieving the 3 percent target set out in Sustainable Development Goal 10.
The Addis Ababa Action Agenda of the Third International Conference on Financing for Development and Sustainable Development Goal indicator 10(c) provides that countries should, by 2030, reduce to less than 3 percent the transaction costs of migrant remittances and eliminate remittance corridors with costs higher than 5 percent.
Remittances are estimated to constitute approximately 65 per cent of the income of some receiving countries and senders spend an estimated 15 percent of their income on remittances.
For 25 African countries, all of which have large diaspora populations, remittances are the primary source of national income.
In response, a number of African countries have acted to lower the costs of remittance transfers. Some countries also offer diaspora bonds to investors and have relaxed foreign exchange controls to allow for electronic and mobile money transfers at reduced costs.
“It should be noted, in that regard, that the use of digital money transfer platforms reduces transfer fees in Africa by an average of 7 per cent,” says the report.
“Private financial institutions also offer incentives to encourage members of diaspora communities to use their services, including low transaction fees for remittances, and facilitate diaspora-initiated projects, especially in the real estate sector. These measures all promote the financial inclusion of migrants and their families.”