By Adedapo Adesanya
A credit rating agency, Agusto & Co, has forecast a surge in remittance inflows into Nigeria in the medium term as the payments from the diaspora have played an increasingly essential role in the country’s economic growth and development.
Nigeria was the second-highest recipient in Africa, with $20.1 billion in diaspora remittances in 2021, trailing only Egypt ($28.3 billion). Although Egypt and Nigeria received over half of all remittances to Africa, the rise in inflows into Egypt remained robust, at double digits (16 per cent), while growth in Nigeria slowed to 3 per cent.
In a note shared with Business Post, Agusto said remittances from the diaspora have played an increasingly essential role in Nigeria’s economy, serving as an important source of foreign exchange earnings and a catalyst for economic growth and development.
“As more Nigerians, discouraged by the country’s gloomy economic conditions, look overseas for an opportunity, their remittances will continue to play a crucial role in sustaining the Nigerian economy. The growth of these funds has been exceptional, empowering dependents to meet their basic needs, pursue education, access healthcare, and embark on entrepreneurial endeavours.”
It noted that Nigeria has been dealing with the challenge of emigration stylised as japa and brain drain for decades, adding that although this has not translated to much in terms of remittances, the opportunities remain.
The firm said that, “As more countries, particularly highly sought-after destinations, have become more welcoming of immigrants as a result of the global labour shortage experienced post-COVID-19, there are now more opportunities than ever for migrants seeking employment in environments with improved economic and living conditions.”
However, “this widespread exodus has left many businesses severely understaffed, which has stunted the expansion of a variety of industries and lowered tax revenues for the government.
“Nonetheless, remittances from the diaspora provide foreign exchange and capital injections to stimulate economic activity. Remittances are also often utilised to support the livelihoods of dependents back home.”
Agusto & Co. believes that the surge in emigration witnessed in 2022 is yet to translate to a commensurate rise in remittances as the majority of the emigrants are students who will not be able to fully join the labour force in their host countries until mid-2023.
In June 2023, the Central Bank of Nigeria (CBN) liberalised the foreign exchange regime, Agusto said the unification of exchange rates would also incentivise remittance inflows through official channels, particularly for investment purposes, as it is likely to improve the FX liquidity position, which would facilitate the repatriation of funds.
“Therefore, Agusto & Co. expects remittance flows into Nigeria to rise to about $26 billion by 2025. This will be supported by improved economic conditions in advanced economies. Given Nigeria’s high poverty rate, which increases reliance on foreign aid,” it said in the note.
Agusto & Co. also called for the need to finance the basic requirements of dependents to remain the most important element driving remittances in the near to medium term.
It added that with the rise in International Money Transfer Operators (IMTOs), these companies would benefit from the dependability and convenience of physical locations as well as the accessibility of digital solutions by having both a digital presence and a real address.
Modupe Gbadeyanka