Diaspora remittances to Sub-Saharan Africa declined by an estimated 12.5 per cent in 2020 to $42 billion, almost entirely due to a 27.7 per cent decline to Nigeria, which accounts for over 40 per cent of such flows to the region, the World Bank has disclosed.
The bank in the latest Migration and Development Brief, revealed that excluding Nigeria, remittance flows to Sub-Saharan African increased by 2.3 per cent with a 37 per cent growth reported in Zambia, Mozambique (16 per cent), Kenya (nine per cent) and Ghana (five per cent).
It stated: “Remittances to Sub-Saharan Africa declined by an estimated 12.5 per cent in 2020 to $42 billion. The decline was almost entirely due to a 27.7 percent 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 (9 per cent) and Ghana (5 per cent).”
In 2021, remittance flows to the region are projected to rise by 2.6 per cent, supported by improving prospects for growth in high-income countries.
The report noted that data on remittance flows to Sub-Saharan Africa are sparse and of uneven quality, with some countries still using the outdated Fourth IMF Balance of Payments Manual rather than the Sixth, while several other countries do not report data at all.
Giving further insight, the report said: “High-frequency phone surveys in some countries reported decreases in remittances for a large percentage of households even while recorded remittances reported by official sources report increases in flows.
“The shift from informal to formal channels due to the closure of borders explains in part the increase in the volume of remittances recorded by central banks.”
On remittance costs, the report stated that Sub-Saharan Africa remains the most expensive region to send money to, where sending $200 costs an average of 8.2 per cent in the fourth quarter of 2020.
Giving a global perspective during the reference period, the World Bank report noted that defying predictions, remittance flows remained strong during the COVID -19 crisis, adding that Low-and Middle Income Countries received $540 billion in 2020, $8 billion less than in 2019.
According to the Bretton Woods institution, despite the pandemic, remittance flows remained resilient in 2020, registering a smaller decline than previously projected. Officially recorded remittance flows to low- and middle-income countries, it added, reached $540 billion in 2020, just 1.6 per cent below the 2019 total of $548 billion.
It noted that the decline in recorded remittance flows in 2020 was smaller than the one during the 2009 global financial crisis (4.8 per cent).
“It was also far lower than the fall in foreign direct investment (FDI) flows to low- and middle-income countries, which, excluding flows to China, fell by over 30 per cent in 2020.
“As a result, remittance flows to low- and middle-income countries surpassed the sum of FDI ($259 billion) and overseas development assistance ($179 billion) in 2020,” the report stated.
It pointed out that 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.
According to the report, the true size of remittances, which includes formal and informal flows, is believed to be larger than officially reported data, though the extent of the impact of COVID-19 on informal flows is unclear.
The World Bank is assisting member states in monitoring the flow of remittances through various channels, the costs and convenience of sending money, and regulations to protect financial integrity that affect remittance flows.
It is working with the G20 countries and the global community to reduce remittance costs and improve financial inclusion for the poor.
With global growth expected to rebound further in 2021 and 2022, remittance flows to low- and middle-income countries are expected to increase by 2.6 per cent to $553 billion in 2021 and by 2.2 per cent to $565 billion in 2022. Even as many high-income nations have made significant progress in vaccinating their populations, infections are still high in several large developing economies and the outlook for remittances remains uncertain.
The global average cost of sending $200 remained high at 6.5 per cent in the fourth quarter of 2020, more than double the Sustainable Development Goal target of 3 per cent. Average remittance costs were the lowest in South Asia (4.9 per cent), while Sub-Saharan Africa continued to have the highest average cost (8.2 per cent).
The report recommended that supporting the remittance infrastructure and keeping remittances flowing includes efforts to lower fees.
Apparently reflecting the severe impact of the COVID-19 pandemic on the incomes of Nigerians living abroad, diaspora remittances inflow into the country fell by over 27 per cent, year-on-year, (YoY) to $17.2 billion in 2020 from $23.55 billion.
The drop 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