Bright prospects for 2021 as Q4’20 records 10.6% growth
By Babajide Komolafe
In apparent reflection of the severe impact of the COVID-19 pandemic on the incomes of Nigerians living abroad, diaspora remittances inflow into the country fell 27 per cent, year-on-year, (YoY) to $17.2 billion in 2020 from $23.55 billion.
The 27 per cent decline represents 18.2 percentage points below the 8.8 per cent decline projected by the World Bank for both Nigeria and the Sub-Saharan African.
In a report issued in October and titled, “Migration and Development Brief 33” the World Bank projected that remittances inflow into Sub-Sahara Africa will fall to $44 billion in 2020 from $48 billion in 2019. It also projected that remittance inflow into Nigeria will fall to $21.7 billion in 2020 from $23.8 billion in 2019.
The World Bank said: “Remittances to Sub-Sahara Africa are expected to decrease significantly by around 8.8 percent between 2019 and 2020, from $48 billion to $44 billion due to the COVID-19 pandemic, restrictions in movement, and their devastating impacts on the global economy.
“Nigeria remains the largest recipient of remittances in the region, and is the seventh-largest recipient among low and middle-income countries (LMICs), with projected remittances to decline to around $21.7 billion, a more than $2 billion drop compared with 2019”.
However, the 27 per cent decline in remittances into Nigeria in 2020 imply that the negative impact of the pandemic on the economic fortunes of Nigerian’s in diaspora is more severe than expected.
This is confirmed by Financial Vanguard analysis of quarterly statistics of the Central Bank of Nigeria (CBN) which showed that remittances inflow fell, YoY, in both half of the year.
In the first half of 2020, H1’2020, remittance inflow fell by 23.7 per cent, YoY, from $11.82 billion in H1’2019. This trend worsened in H2’2020 with remittance inflow falling by 30 per cent, YoY, to $8.2 billion from $11.73 billion in H2’2020.
Further analysis, however, showed an upward trend in remittances in the Q3’2020 and Q4’2020. After suffering Quarter-on-Quarter (QoQ) decline of 5.3 per cent to $5.64 billion in Q1’2020, and 40 per cent decline to $3.38 billion in Q2’2020, remittances inflow revived and rose QoQ by 15 per cent to $3.89 billion in Q3’2020 and further by 10.6 per cent to $4.31 billion in Q4’2020.
The World Bank projected further decline in remittances inflow for Nigeria and other countries in the Sub Saharan region in 2021. But it however stressed the need for government measures to address the downward trend.
It stated: “This declining trend is expected to continue in 2021, when remittances are projected to decrease by around 5.8 percent to reach $41 billion (in Sub Saharan Africa).
The decline in remittance flows is attributed to a combination of factors, all driven by the COVID-19 crisis in major destination countries, including EU countries, the United States, China, and GCC countries. Sub-Saharan migrants are disproportionately affected in host countries as many are in precarious working conditions and informal jobs, with high vulnerability to contagion and loss of employment. In addition, these migrants are often excluded from social protection systems, health care, and government stimulus measures.
“For countries where remittances account for a large share of GDP, a sharp decline in remittance inflows is expected for 2020 and 2021, as many migrant workers have seen their income plummet, especially in OECD countries. “Governments efforts to facilitate remittance inflows in these economies would be needed in addition to more efforts to support household remittance recipients who will be facing a significant decline in remittances.”
Apparently in response to this recommendation, the CBN in December 2020, introduced a policy that allows beneficiaries of diaspora remittance to be paid in foreign currency.
This was followed up with another policy announced earlier this month, tagged Naira4dollar scheme, which involves the CBN paying diaspora Nigerians N5 rebate for every $1 of remittances sent through licensed International Monetary Transfer Operators (IMTOs).
Consequently, analysts at FBNQuest Merchant Bank opined that the downward trend in remittances inflow into Nigeria in 2020 will be reversed in 2021.
Citing the upward trend in Q3’2020 and Q4’2020 as well as recent measures introduced by the CBN to boost remittances inflow into the country as basis for their optimism, they said: “The q/q improvement is probably due to the fact that the low point in the COVID cycle for those G7 economies where the Nigerian diaspora is concentrated was the previous (second) quarter of 2020.
“Theories as to Nigeria’s relative underperformance abound.
It could be that the Nigerian diaspora has a particularly large presence in those economies that have taken the largest hits from the virus (the Eurozone and the UK). The exchange-rate regime (i.e. the sense that the recipient was not getting ‘full value’ in naira) may have been another factor.
“Looking ahead, we would expect a recovery in remittances as the G7 economies rebound.”
CBN Governor Emefiele also expressed confidence that the recent measures of the apex bank will boost remittances inflow, adding that weekly remittance inflow had increased to $30 million from $5 million, following measures introduced in December.
Speaking at the diaspora webinar organised by Fidelity Bank, where he also announced the Naira4dollar scheme, Emefiele said: “We believe our efforts at driving remittance inflows into Nigeria would yield positive results as we strive to ensure formal banking channels offer cheaper, faster and more convenient ways for remitters to send funds to beneficiaries.
“Reducing the cost of sending remittances is a significant way to boost remittance inflows to Nigeria. In general, the new policy is expected to enlarge the scope and scale of foreign exchange inflows into the country with a view to stabilizing the exchange rate and supporting accretion to external reserves.
More importantly, it will provide an opportunity for Nigerians living abroad to make investments in their home country.”