Writer: ONYEKACHI PAUL
Diaspora remittances could hold the key to stabilizing the naira and unlocking the immense potential within Nigeria.
Given Nigeria’s substantial diaspora population, the country has received the largest inflow in Sub-Saharan Africa. The recent devaluation of the naira has placed significant pressure on the currency, causing it to reach a new low of nearly 1000/$.
The solution to safeguarding the naira may rest with Nigeria’s diaspora population, with the United States, United Kingdom, and Canada emerging as prominent destinations.
In 2022, Nigerians sent home 21.9 billion dollars, a figure projected to rise to 26 billion dollars by 2025 according to Augusto and Co’s projections. To provide context, Foreign Direct Investment (FDI) for the same period was a negative 187 million dollars, as stated by the World Investment Report 2023.
Diaspora remittances accounted for 4.2% of Nigeria’s Gross Domestic Product (GDP) in 2022, and this figure could grow further with the right policies.
According to a 2017 report from the Migration Policy Institute, Nigeria boasts the most educated migrant group in the US with many in high paying profession in Science, Technology, Engineering, and Maths (STEM).
In the UK, as reported by www.thenationalnews.com with data from the Office of National Statistics, “Nigerian immigrants exhibit high levels of educational achievement, with 66 percent having attained some form of qualification. This outpaces other large immigrant groups in Britain, including Indians and South Africans.”
This educational background positions Nigerians for management roles with substantial remuneration. Hence, Nigerians as a diaspora bloc possess immense economic power capable of transforming their home nation. Increased inflow could inadvertently impact the value of the naira.
What strategies could the CBN employ to stimulate remittances?
Fola Shonubi, the acting Governor of the Central Bank of Nigeria (CBN), addressed the fall of the naira in a recent speech at the National Institute for Security Studies, attributing it to remittances through unofficial channels.
He remarked, “With those remittances, the dollars have come in; we know the dollars have come in, but we don’t see them in the official system. So, they must be going somewhere and somewhere.”
The CBN can introduce incentives to promote remittances through official channels. The recent unification of the exchange rate is a policy likely to encourage remittances through official routes.
Another policy approach could be inspired by the Philippines’ model, focusing on reducing the cost of remittances as advocated by the World Bank. The World Investment Report 2023 noted, “The costs of sending remittances to the Philippines from other countries in the region are among the world’s lowest because of efforts by the government and the private sector to develop digital platforms and expand information on remittance services.”
According to a report by cenfri.org in 2019, the cost of sending remittances to sub-Saharan Africa amounts to 9.3% of the transaction’s value, in contrast to the global average of 6.9%.
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