Fewer Funds for the Folks back Home
Nigeria’s international remittances in 2022 were almost at the same level as they were in 2010. Like my friend Aisha, one might wonder why this matters to you.
I reminded Aisha about her uncle in Germany who used to send money through her domiciliary account to his wife and children, and how she noted that the Uncle has stopped sending money to Nigeria since his family travelled abroad to meet him.
In short, if a relative or friend sends you money from another country, that’s an international remittance to Nigeria.
Remittances are known as “funds for the folks back home” according to the International Monetary Fund (IMF). It is the money or goods that migrants send back to families and friends in origin countries.
The general trend shows a decline in international remittances to Nigeria in the last 13 years.
Several factors could be responsible for this. This include difficulty in processing transfers, the higher rate of travel alongside dependants that reduces the need to send money home, and global events such as tough economic conditions abroad and the effects of the COVID-19 pandemic on income of nationals abroad.
According to the Asian Development Bank (ADB), poverty intensity can be decreased by 16% with every 1% rise in international remittances to a country.
This implies that a reduction in foreign remittances may result in lower household income, higher rates of poverty, lower consumption, lower out-of-pocket expenditures on health and education, and slower rates of economic growth.
The ADB added that after foreign direct investment (FDI), international remittances are the second most significant external financial source for developing nations.
World Bank data shows that, on average, the international remittance received by a recipient of remittances reduced from $122.67 in 2010 to $92 in 2022.
This shows that an individual who used to get $122 from relatives abroad in 2010 now gets $92 in 2022 as a direct remittance.
Nigeria experienced its lowest level of total overseas remittances in 2020. The World Bank attributed this to the COVID-19 pandemic.
This marked the first time the country saw such a significant drop in remittances. Following the pandemic year, remittances began to recover. By 2022, the amount reached $20.13 billion, reflecting an increase from the pandemic-induced low.
However, the 2022 figure was still below the amount recorded in 2015, indicating that while there is an upward trend lately, remittances are yet to return to their previous peak levels.
Nigeria drops from 6th to 9th Globally
From 2010 to 2022, Nigeria has consistently ranked among the top 10 countries receiving international remittances.
Data shows that in 2010, Nigeria's position as the 6th largest recipient reflected a strong and stable inflow of remittances, underpinned by a large and active diaspora.
However, in 2020, Nigeria's drop to the 10th position can be attributed to the severe impact of the COVID-19 pandemic, which disrupted global economic activities and adversely affected the incomes of expatriates, thereby reducing their ability to remit funds.
This decline highlights the vulnerability of remittance-dependent economies to global economic shocks.
By 2022, Nigeria's improvement to the 9th position suggests a partial recovery in remittance flows as global economic conditions stabilised post-pandemic, although the country has not fully regained its pre-pandemic ranking.
The World Bank's (2006) International Migration and Development Research report provides comprehensive insights into the impact of international remittances on poverty alleviation.
According to the program's findings, international remittances play a significant role in reducing both the level and depth of poverty in recipient countries.
However, the World Bank observed that countries with higher levels of poverty do not necessarily receive more remittances.
This is particularly evident in regions like Sub-Saharan Africa, where poverty is widespread, yet the volume of remittances remains relatively low.
The limited migration is due to several factors, including restrictive immigration policies in potential destination countries, higher costs and risks associated with migration, and fewer networks abroad to facilitate migration.
Overall, the World Bank’s research underscores the importance of international remittances in reducing poverty but also highlights the uneven distribution of these financial flows.
It suggests that while remittances can significantly alleviate poverty, the benefits are more pronounced in countries with greater migration opportunities, particularly those close to major labour-receiving regions.
The underlying reason for this discrepancy is that the poorest countries often produce fewer international migrants.
In the case of Nigeria however, about 2.11 million persons emigrated from Nigeria in 2022 alone, the biggest increase in a year, according to NIS’s Migration Information Data Analysis System (MIDAS). However, the international remittance does not reflect a proportionate increase.
Why Japa ≠ Higher Remittance or Brain Drain
The reduced remittances to Nigeria could indicate that Nigerians migrating or currently living abroad are either not fully economically active in their host countries, or have fewer reasons to send money home because their family members have migrated with them.
A clear indication of this is the UK government’s report on how the estimated number of Nigerian dependents climbed to 60,506 by the end of 2022, up from 1,427 in 2019.
The fact that there is an increasing proportion of dependents, students, and early career workers among Nigerian out-bound immigrants could also explain why these have not worsened the brain drain effect on the economy.
The human flight and brain drain index for Nigeria corroborates this.
The human flight and brain drain index projects the effect the emigration of skilled individuals and the potential loss of human capital has on the economy.
Where 10 indicates the worst effect and 0 signalling no effect, the index score declined in 2015 and 2020 and remained constant in 2022 with the same score.
This means the massive migration in recent years had less effect on the economy than it used to as of 2010.
Though the recent 6.6 score still suggests that immigration is harming the country’s economy, Nigerians who relocated in the last 13 years were less of the active labour force or were not significantly contributing to the immediate monetary value of the country’s output, as dependents, students, and early career workers are.
Don’t forget Area O!
This section is for the folks in the diaspora. Did you know your remittances are like magic potions for the economy?
Your dollars, pounds, and euros, are not just helping Uncle Emeka get his costly medications or helping niece Chidi pay school fees. Your money is working double shifts to boost the whole economy.
So, in the evergreen words of Sound Sultan, Don’t forget area o!
When you send money back home, you're not just making your family's day brighter, you're also fighting the forces of poverty and driving economic growth! Your cash is out there, wearing a cape, reducing poverty, and lifting household incomes.
So, next time you hit that "send" button on your remittance app, remember: you're not just a loving family member or friend; you're an economic powerhouse! The economy salutes you, and so do we. Keep those remittances coming.