World Bank report says SSA returned to growth with $45bn in diaspora remittances in 2021
Nigeria is among the key remittance destinations in sub-Saharan Africa, with remittance receipts amounting to $24 billion in 2019. According to a World Bank report, Nigeria recorded a moderate rebound in remittance inflow estimated at $17.638 billion so far in 2021 from $17.208 billion in 2020 on the back of the coronavirus pandemic. The latest briefing shows that since 2018, remittance inflow has been on the decline across sub-Saharan Africa but has now returned to growth in 2021, increasing by 6.2 percent to $45 billion.
The report highlights that in the last decade, 2018 was the peak period for foreign currencies inflows into the country from Nigerians in the diaspora when a total inflow of $24.311 billion was received, but which declined to $23.809 billion in 2019, $17.208 billion in 2020, amidst pandemic induced pressures.
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“Nigeria, the region’s largest recipient, is experiencing a moderate rebound in remittance flows, in part due to the increasing influence of policies intended to channel inflows through the banking system,” states the report.
An estimate from the World Bank’s Migration and Development Brief just published, shows that remittances to low and middle-income countries are projected to have grown a strong 7.3 percent to reach $589 billion in 2021. It said this return to growth is more robust than earlier estimates and follows the resilience of flows in 2020 when remittances declined by only 1.7 percent, despite a severe global recession due to COVID-19.
The brief further highlights that for the second consecutive year, remittance flows to low and middle-income countries (excluding China) are expected to exceed the sum of foreign direct investment (FDI) and overseas development assistance (ODA), which underscores the importance of remittances in providing a critical lifeline by supporting household spending on essential items such as food, health, and education, during periods of economic hardship in migrants’ countries of origin.
Michal Rutkowski, World Bank Global Director for Social Protection and Jobs, in his comments on the subject matter, said: “Remittance flows from migrants have greatly complemented government cash transfer programmes to support families suffering economic hardships during the COVID-19 crisis. Facilitating the flow of remittances to provide relief to strained household budgets should be a key component of government policies to support a global recovery from the pandemic.”
As had been recently highlighted by the International Monetary Fund (IMF), “Nigeria is among the key remittance destinations in sub-Saharan Africa, with remittance receipts amounting to $24 billion in 2019. Remittances typically are made through international money transfer operators (e.g., Western Union) with fees ranging from 1 percent to 5 percent of the value of the transaction. The eNaira is expected to lower remittance transfer costs, making it easier for the Nigerian diaspora to remit funds to Nigeria by obtaining eNaira from international money transfer operators and transferring them to recipients in Nigeria by wallet-to-wallet transfers, free of charge. Exchange rate reforms, including a unified market-clearing rate, that reduce the gap between official and parallel market exchange rates would enhance the incentives for using eNaira wallets to send remittances.”
On factors contributing to the strong remittance growth, the World Bank report said migrants’ determination to support their families in times of need, aided by economic recovery in Europe and the United States which in turn was supported by the fiscal stimulus and employment support programmes.
Looking into regional remittance growth trends, there was strong growth in most regions. Thus, in regions such as the Gulf Cooperation Council (GCC) countries and Russia, the recovery of outward remittances was also facilitated by stronger oil prices and the resulting pickup in economic activity. In Latin America and the Caribbean, flows rose 21.6 percent with exceptional growth due to economic recovery in the United States and additional factors, including migrants’ responses to natural disasters in their countries of origin and remittances sent from home countries to migrants in transit.
Also, growth of inflows was 9.7 percent in the Middle East and North Africa, 8 percent in South Asia, while in sub-Saharan Africa, and Europe and Central Asia, there were reported growths of 6.2 percent and 5.3 percent, respectively, while on the other hand in East Asia and the Pacific, remittances fell by 4 percent – though, excluding China, remittances registered a gain of 1.4 percent in the region.
Meanwhile, the cost of sending $200 across international borders continued to be too high, averaging 6.4 percent of the amount transferred in the first quarter of 2021, the World Bank’s Remittance Prices Worldwide Database revealed.
On the outlook, remittance inflows across the globe are expected to grow 2.6 percent in 2022 in line with global macroeconomic forecasts. However, the resurgence of COVID-19 cases and the reimposition of mobility restrictions pose the biggest downside risk to the outlook for global growth, employment and remittance flows to developing countries. Also, the rollback of fiscal stimulus and employment-support programmes, as economies recover, may likely dampen remittance flows.
According to the projections, as highlighted in the recently published report, the officially recorded remittance flows to East Asia and Pacific region are projected to have fallen by 4 percent in 2021 to $131 billion. Nevertheless, remittances to the region, excluding China, grew by 1.4 percent in 2021 and are projected to grow by 3.3 percent in 2022.
For Europe and Central Asia, remittance flows are projected to have grown 5.3 percent to $67 billion in 2021 due to stronger economic activity in the European Union and surging energy prices after declining 8.6 percent in 2020. It is expected that remittances in the region will grow by 3.8 percent in 2022 as remittances are currently the largest source of external financing in the region. Inflows have been higher or equal to the sum of FDI, portfolio investment, and ODA in 2020 and 2021.
Furthermore, remittance flows into Latin America and the Caribbean will likely reach a new high of $126 billion in 2021, registering a solid advancement of 21.6 percent compared to 2020. In 2022, remittances are expected to grow by 4.4 percent, mainly due to a weaker growth outlook for the United States.
The World Bank said the adverse effects of COVID-19 and Hurricanes Grace and Ida contributed to higher remittance flows to Mexico and Central America. Other main drivers include recovery in employment levels and fiscal and social assistance programs in host countries, particularly the United States.
Remittances to the developing countries of the Middle East and North Africa (MENA) region are projected to have grown by an estimated 9.7 percent in 2021 to $62 billion, supported by a return to growth of host countries in the European Union (notably France and Spain) and the upsurge in global oil prices, which positively affected the GCC countries. The increase was driven by strong gains in inflows to Egypt (12.6 percent to $33 billion) and to Morocco (25 percent to $9.3 billion), return migration and transit migration respectively, playing important roles in the favourable outturns. Meanwhile, remittance receipts for the Maghreb (Algeria, Morocco, and Tunisia) surged by 15.2 percent, driven by growth in the Euro Area.
For South Asia, remittances likely grew by about 8 percent to $159 billion in 2021. Higher oil prices aided economic recovery and drove the spike in remittances from the GCC countries, which employ over half of South Asia’s migrants. In India, remittances advanced by an estimated 4.6 percent in 2021 to reach $87 billion. Pakistan had another year of record remittances with growth of 26 percent and levels reaching $33 billion in 2021. Also, the government’s Pakistan Remittance Initiative to support transmission through formal channels attracted large inflows.
For sub-Saharan Africa, remittance inflows are projected to grow by 5.5 percent in 2022 due to continued economic recovery in Europe and the United States. Nigeria, the region’s largest recipient, is experiencing a moderate rebound in remittance flows, in part due to the increasing influence of policies intended to channel inflows through the banking system. Although intra-regional migration makes up more than 70 percent of cross-border migration, costs are high due to small quantities of formal flows and the utilization of black-market exchange rates.