Professor Ndubuisi Ekekwe, Lead Faculty Tekedia Institute, has described the recently launched $10 billion Diaspora fund by the Federal Government of Nigeria, as a great idea capable of given the government the opportunity of tapping into the wallets of its diaspora.
He made this known on his official LinkedIn page. The Johns Hopkins trained Scholar, said it will afford the federal government the opportunity to provide support to critical sectors such as; infrastructure, health-care, and education, ultimately driving economic growth.
Doris Uzoka-Anite, minister of industry, trade and investment, said the federal government is seeking bids from asset managers to set up a $10 billion diaspora fund.
The initiative, the minister said, is expected to support critical sectors including infrastructure, health care and education to grow the economy.
Uzoka-Anite said the fund will be guided by an advisory board comprising limited partners, calling on eligible firms to express their interest in its management.
“The fund is part of broader efforts to strengthen ties between Nigeria and its diaspora, promote national development,” she said.
“Objective of the Nigeria diaspora fund; “The fund will be managed by Fund Managers that satisfy the criteria set out in the Expression Of Interest (EOI). The Fund manager will propose Fund structures that will focus on various sectors and stages of investments.
“Subject to the preferences indicated by fund managers, the fund will contain multiple investment platforms designed to offer investors different mechanisms for participating in Nigeria’s economic transformation.
“This fund is a way of encouraging remittances, attracting investments and facilitating philanthropic endeavours aimed at supporting various sectors such as infrastructure, healthcare, education and entrepreneurship in Nigeria.
“The launch of the diaspora fund will serve as an opportunity to raise interest in and awareness of the fund: towards mobilizing capital investment from the diaspora community.”
The World Bank’s data underscored Nigeria’s prominence in remittance inflows within the sub-Saharan region, with the country accounting for a significant share.
According to Augusto &Co, In 2020, remittance flows to LMICs exceeded the flow of foreign direct investments (FDI) and overseas development assistance to LMICs (excluding flows to China) and served as a major lifeline to these vulnerable economies as they grappled with the adverse effects of the COVID-19 pandemic.
Global remittance flows, which increased by 5% to $831 billion in 2022, are expected to grow by a more modest 1% to $840 billion in 2023.
Techeconomy also reported that diapora remittances to Nigeria Increases 2% to $20.5bn by End of 2023.
The anticipated moderation is hinged on the elevated cost of living in several advanced economies, including the United States of America (USA), the United Kingdom (UK), and the Eurozone, which accounted for almost half of global outward remittances in 2022.
The steady inflow of funds from the Nigerian diaspora reflects the strong bond between the diaspora community and their home country, fostering economic stability and contributing to economic development.
Despite the positive outlook for remittances, questions remain about whether these funds alone can alleviate the economic pressures faced by Nigeria.
Reacting, Victor Aluyi, head of Investment at Sankore Global Investment, shared insights on this development.
Aluyi emphasized the significance of remittances as a key source of private external finance that is expected to grow in the coming years.
The Nigerian government is keen on leveraging these remittances to mobilize capital and support development finance.
With remittance flows to developing countries surpassing Foreign Direct Investment (FDI) flows, Nigeria stands to benefit from tapping into this financial resource.
The country’s diaspora remittance was valued at around $20 billion at the end of last year, according to Aluyi.
However, due to distortions in the foreign exchange (FX) market, a considerable portion of these remittances flowed through unofficial channels, indicating even higher potential inflows.
The establishment of the diaspora fund thus presents an opportunity to formalize and maximize these remittances for economic growth.
In light of the current economic challenges facing Nigeria, including debt burdens and FX volatility, the diaspora fund offers a promising solution.
By harnessing the financial contributions of Nigerians living abroad, the government aims to strengthen its finances, address debt concerns, stabilize the FX market, and enhance the value of the local currency.
While exploring various options such as loans from international institutions and capital market investments, the diaspora remittance stands out as a valuable resource that can drive sustainable economic development.
Aluyi further suggested the integration of diaspora funds into long-term debts through a diaspora bond mechanism could offer a robust framework for capital retention and growth.
Despite the positive outlook for remittances, questions remain about whether these funds alone can alleviate the economic pressures faced by Nigeria.
The government must carefully balance its financial strategies, considering options like leveraging the diaspora bond and tapping into varied funding sources.
Recent financial partnerships and agreements, including collaborations with Multilateral Investment Guarantee Agency (MIGA) and international institutions like the World Bank, signify progress in securing external funds.
The clearance of FX backlogs and impending financial inflows, such as the anticipated $2.25 billion from the World Bank, are steps towards stabilizing the economy.
Amidst these efforts, there is a looming deadline for banks to submit their capitalization plans, adding a sense of urgency to the financial landscape.
The recapitalization requirements have spurred banks to strategize and seek shareholder approval within a tight timeframe.
While some institutions have shown preparedness, the possibility of a deadline extension to accommodate all banks remains on the horizon.
As Nigeria navigates through economic reforms and financial restructuring, the establishment of the diaspora fund emerges as a pivotal move towards economic recovery and growth.
By harnessing the resources and expertise of its diaspora community, Nigeria aims to fortify its economic foundation and chart a sustainable path towards prosperity.
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