A few weeks ago, the Managing Director of the International Monetary Fund (IMF), Kristalina Georgieva, stoked a debate on how peer-to-peer transactions in “safe” digital money could reduce the cost of remittances and bridge the “digital divide”, especially in low-income regions like Africa.
With a strong sense of foreboding, Georgieva warned against the possibility of a widening digital divide if financial institutons to not key into the opportunity offered by e-money to facilitate remittances, which the IMF and the World Bank insist are crucial for reducing global poverty and fast-tracking economic development.
Nigerians and, indeed, other Africans living abroad have added significantly to domestic income and social welfare through remittances, the World Bank noted in its 2020 report on global immigration. The economic benefits of remittance inflows to Africa have contributed to the funding of cash and non-cash investments, thus fueling new businesses, settling family debts and reducing income inequality.
PwC Nigeria’s Chief Economist, Dr. Andrew Nevin, had argued that Nigeria’s largest export is people, not oil. Nevin’s position is justified by the huge earnings from remittances by Nigerians in the diaspora, which exceed the country’s earnings from crude export.
Sadly, the COVID-19 Pandemic has taken a toll on the amount received by African families from ‘abroadians’. As personal incomes shrunk across Europe, America and Asia last year, the amount wired back home nosedived with financial research institutions warning that the decline would have dire consequences for the social welfare of low-income families in Africa, Asia and the Caribbean especially.
As predicted, Nigeria took a beating as its 2020 remittance receipts dipped by as much as 27.7 per cent, from $23.24 billion posted in 2019 to $16.8 billion while inflows to the entire Sub-Saharan African slid by 12.5 per cent. It declined to approximately $42 billion.
“The decline was almost entirely due to a 27.7 per cent decline in remittance flows to Nigeria, which alone accounted for over 40 per cent of remittance flows to the region. Excluding Nigeria, remittance flows to sub-Saharan African increased by 2.3 per cent. Remittance growth was reported in Zambia (37 per cent), Mozambique (16 per cent), Kenya (nine per cent) and Ghana (five per cent),” a World Bank report said.
Notwithstanding the huge figures officially reported, different reports suggest that a huge portion of the money Africans in the diaspora remit home monthly are routed through cheaper but unsafe unofficial channels. In recognition of the negative impact of the informal channels on the sector, the Central Bank of Nigeria (CBN) retooled the process, an effort that rides on liberalising and incentivising the critical supply side. First, it ceded power to recipients to decide how they should be paid as against the former practice where they were handed the naira equivalent of the value of the foreign currency transacted.
The Central Bank’s Governor, Godwin Emefiele, had last year, during a meeting with IMTOs and bank representatives, admitted that urgent steps must be taken to make the formal channels of transitions attractive to both senders and recipients, charging participants to rise to the occasion and build an inclusive money transfer market.
Read more at: https://guardian.ng/business-services/bridging-gaps-in-remittances-with-new-solutions/
