By Adedapo Adesanya
The World Bank has said remittances to Nigeria and other Sub-Saharan African nations will decline sharply by about 23.1 percent this year, due to the economic crisis induced by the COVID-19 pandemic and shutdown.
The Bretton Wood Institution said in a press statement that, globally, a reduction of 20 percent has been projected and this is set to be the sharpest decline in recent history.
This is largely due to a fall in the wages and employment of migrant workers, who tend to be more vulnerable to loss of employment and wages during an economic crisis in a host country.
Remittances alleviate poverty in lower- and middle-income countries, improve nutritional outcomes, are associated with higher spending on education, and reduce child labour in disadvantaged households.
So, as a result of the fall in remittances affect families’ ability to spend on these areas as more of their finances will be directed to solve food shortages and immediate livelihoods needs.
Remittances to Sub-Saharan Africa registered a small decline of 0.5 percent to $48 billion in 2019. Due to the COVID-19 crisis, remittance flows to the region are expected to decline by 23.1 percent to $37 billion in 2020, while a recovery of 4 percent is expected in 2021.
The anticipated decline can be attributed to a combination of factors driven by the coronavirus outbreak in key destinations where African migrants reside including in the EU area, the United States, the Middle East, and China.
According to the World Bank Group President, Mr David Malpass, “Remittances are a vital source of income for developing countries. The ongoing economic recession caused by COVID-19 is taking a severe toll on the ability to send money home and makes it all the more vital that we shorten the time to recovery for advanced economies.”
“Remittances help families afford food, healthcare, and basic needs. As the World Bank Group implements fast, broad action to support countries, we are working to keep remittance channels open and safeguard the poorest communities’ access to these most basic needs,” he added.
According to the global lender, remittances to low and middle-income countries (LMICs) are projected to fall by 19.7 percent to $445 billion, representing a loss of a crucial financing lifeline for many vulnerable households.
With remittance flows expected to fall across all regions globally, Europe and Central Asia will equally experience the highest fall with 27.5 percent.
Sub-Saharan Africa will follow with 23.1 percent. Others include: South Asia (22.1 percent), the Middle East and North Africa (19.6 percent), Latin America and the Caribbean (19.3 percent), and East Asia and the Pacific (13 percent).
The large decline in remittances flows in 2020 comes after remittances to LMICs reached a record $554 billion in 2019.
Even with the decline, remittance flows are expected to become even more important as a source of external financing for LMICs as the fall in foreign direct investment is expected to be larger (more than 35 percent).
In 2019, remittance flows to LMICs became larger than FDI, an important milestone for monitoring resource flows to developing countries.
The World Bank then estimated that remittances to LMICs will recover next year and rise by 5.6 percent to $470 billion.
