Diaspora remittance up 15.6% QoQ
By Jeph Ajobaju, Chief Copy Editor
Remittances by Diaspora Nigerians to their homeland dropped 24 per cent in the first quarter of 2021 (Q1 2021) but rose 15.6 per cent to $9.22 billion in Q2 (or H1 2021) compared with $7.98 billion in H1 2020.
It inched up 2.2 per cent in Q2 2021 against $9.02 billion in Q2 2020, according to the latest balance of payment data from the Central Bank of Nigeria (CBN).
The H1 2021 remittance inflow is the highest level since H2 2019.
The increase rode on the Naira4dollar scheme the CBN extended indefinitely in May which rewards remittance recipients with N5 for every $1 received from licensed international money transfer operators (IMTOs) and commercial banks.
Nairametrics reports that although inflow is yet to reach pre-pandemic levels, it is rising compared with 2020 that was soured by global pandemic economic meltdown.
The new figure supports Nigeria’s current account balance on a net deficit since Q1 2021. The deficit reduced to $424 million in H1 2021 from $2.1 billion in H1 2020.
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Further breakdown
- Remittance inflow in the past five years amounted to $115.15 billion.
- Remittance outflow in the period totalled $1.18 billion, a net credit of $113.96 billion.
- Diaspora remittance outflow in H1 2021 dropped 30.1 per cent to $24.18 million from $34.59 million in H2 2020.
- It also declined 10.6 per cent in H1 2021 against $21.86 million in H1 2020.
World Bank report
The World Bank has reported that Nigeria returned to growth in remittance inflows in 2021 due to CBN policies which channel inflows through the banking system, pointing at the Naira4dollar scheme.
According to the report, Nigeria is the largest recipient of remittance inflows in Sub-Saharan Africa in 2021 which rose 6.2 per cent to $45 billion and is projected to grow 5.5 per cent in 2022.
The World Bank said remittances to low-and middle-income countries are projected to have grown 7.3 per cent to $589 billion in 2021.
“Remittance flows from migrants have greatly complemented government cash transfer programs to support families suffering economic hardships during the COVID-19 crisis,” World Bank Global Director for Social Protection and Jobs, Michal Rutkowski, said in a statement.
“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.”
The World Bank said
- Factors contributing to remittance growth are migrants’ determination to support their families, aided by economic recovery in Europe and the United States facilitated by fiscal stimulus and employment support programmes.
- Recovery of outward remittances in the Gulf Cooperation Council (GCC) countries and Russia was facilitated by stronger oil prices and pickup in economic activity.
Omicron threat
Nairametrics notes that Omicron, the new variant of Covid-19, may impede the growth of diaspora remittances to Nigeria as the virus, which is resilient against Covid vaccine, can halt economic activities in Europe and North America.
If the virus continues to threaten recovery in those economies, diaspora remittances into low and middle-income economies could be affected.
Importance of diaspora remittance
Diaspora remittance is one of the most important sources of external flows of capital and foreign exchanges to many developing countries.
It is the second-largest source behind foreign direct investment (FDI) of external funding for these countries. The CBN reports diaspora remittances as workers’ remittances in its balance of payment report.
Diaspora remittance to Nigeria fell 24 per cent in Q1 2021 because of downturn in developed economies coupled with Nigerian foreign exchange (forex) policy which forced diaspora Nigerians to transfer funds through black market channels.
However, with CBN clampdown on cryptocurrency transactions and incentive for every dollar received through official channels, diaspora remittance is regaining steam to boost dollar liquidity and help forex market intervention.