The decline was almost entirely due to a 27.7 percent decline in remittance flows to Nigeria, which alone accounted for over 40 percent of remittance flows to the region. Remittance flows to the region were affected by the COVID-19 pandemic, in particular by restricted mobility measures and the employment situation in the main host countries.
The decrease in inflows to Nigeria is partly attributable to a high (27 percent) premium on the Naira/US$ exchange rate in informal markets, and an unexpected policy directive requiring the agent banks of money transfer operators to pay out in US Dollars (or hard currency) rather than Naira. Excluding Nigeria, remittance flows to Sub-Saharan African increased by 2.3 percent, demonstrating resilience at a time of crisis. Indeed, strong remittance growth was reported in Zambia (37 percent), Mozambique (16 percent), Kenya (9 percent), and Ghana (5 percent).
Remittance flows to the region are projected to rise by 2.6 percent ($43 Billion) and 1.6 percent ($44 Billion) in 2021 and 2022, respectively. Remittances are expected to be supported by improving growth prospects in the United States and other high-income host countries. Remittances to Kenya for Q1 2021 increased by 17 percent compared to Q1 2020, supported by a 40 percent increase in remittances from North America. According to the World Bank Remittances Prices Worldwide, Sub-Saharan Africa remains the most expensive region to send money to, at an 8.19 percent cost on average in Q4 2020.
South Africa is the most expensive G20 country to send money from – it costs 19.6 percent to send $200 to Botswana, 14 percent to Zimbabwe, and 16 percent to Malawi. Data from the Central Bank of Somalia and Zimbabwe reported an increase of 16 percent and 31 percent respectively. In Cape Verde, The Gambia, and Senegal, remittances inflows fared better than projected.
In Kenya, the increase in remittances was largely due to increased flows from the United States, host to over a quarter of Kenyan migrants. Remittances to Lesotho are a fifth of GDP while in The Gambia they represent almost 16 percent of GDP, and in Comoros and Cape Verde they represent 13 percent of GDP.
“It is worth noting that the data on remittance flows to Sub-Saharan Africa are sparse and of uneven quality, perhaps more so than in the other regions. Many countries do not report data at all. Of those that do, many use an outdated methodology to record remittances (that is, they depend on the fourth IMF Balance of Payments Manual rather than the sixth edition),” the World Bank stated.
Some countries – for example, Somalia and Zimbabwe – collect data, but do not report them to the IMF. In many large remittance-recipient countries, there are no monthly or quarterly data, and in some cases, data are reported after a long lag of three or four quarters. Moreover, the use of informal channels is believed to be widespread in many African countries, considering the magnitude of informal intraregional migration.
According to the World Bank, despite COVID-19, remittance flows remained resilient in 2020, registering a smaller decline than previously projected said World Bank on Wednesday. The main drivers for the steady flow included fiscal stimulus that resulted in better-than-expected economic conditions in host countries, a shift in flows from cash to digital and from informal to formal channels, and cyclical movements in oil prices and currency exchange rates.