Foreign remittance into Nigeria is estimated to hit $20.9 billion by the end of 2022, compared to $19.5 billion in remittances inflow recorded in 2021.
This represents a 7.5% rise from the prior year of 2021.
This is according to the World Bank’s November report titled “Remittances Brave Global Headwinds Special Focus: Climate Migration” published in November.
The report notes that remittance flows to Africa in 2021 registered a strong 16.4 percent increase to reach $50 billion, exceeding expectations in the May 2022 Migration and Development Brief (World Bank/KNOMAD 2021a).
The report also noted that total remitance inflows was $596.9 billion in 2021 for low and medium income earners and estimates $781 billion around the world.
What the data is saying: According to the World Bank, the increase in remmitance inflow into Sub-Saharan Africa is due in large part to a resumption of stronger flows to Nigeria, reaching $19.5 billion on growth of 13.2 percent.
- According to the World Bank, high-frequency remittance data for 2022 for Kenya and Nigeria reveal remiitance were expected to fall 2022.
- Nigeria however, witnessed a sharp recovery in flows during 2021 (13.2 percent), maintaining the improved momentum of 2021 into the first quarter of 2022.
- However, growth fell in Q2 data to 0.5% vis-à-vis the same period of 2021
- Nigeria’s remittance inflows have averaged $21 billion since 2014 with $24.3 billio and $17.2 billion being the highest and lowest recorded in 2018 and 2020 respectively.
Headwinds: The report noted that Nigeria was not gaining much from the surge in crude oil prices while Nigerians in diaspora in the US, UK and Euro continue to face economic challenges to their income
- Nigeria’s is therefore expected to report a falloff in remittance flows to growth of 7.5% for 2022.
- The report also notes that the largest recipients of remittances in the Sub-Saharan Africa during 2022—measured in US dollar terms—include Nigeria, Ghana, Kenya, and Senegal.
- Nigeria is also included among the top 10 receipients of remittances globally.
Cost of remmittances: Sub-Saharan Africa was named as the most expensive region to send money to.
- According to the World Bank, senders had to pay 7.8% to send $200 to African countries during Q2 2022.
- The average difference between the five most expensive and five least expensive corridors is astounding and significantly higher than in any other developing region.
- The average cost of remitting $200 from countries in the least expensive corridors amounted to 3.4 percent in the second quarter of 2022.
- In contrast, costs for the most expensive corridors registered 25.2 percent.
More Expensive within Africa: Intra Africa transfer of forex remains an expensive venture. According to the report it cost about 35.% to transfer $200 from Tanzania to Uganda.
- “Though intraregional migrants in Africa comprise more than 70 percent of all migration from or within the region, intraregional remittance costs are quite high due to the small quantities of formal flows and utilization of black market exchange rates. For example, sending $200 in remittances from Tanzania to neighboring Uganda would have cost the migrant 35.2 percent in the second quarter of 2022.”
What this means: Cross border transfer remains a major form of foreign currency repatriation in Sub-Saharan Africa, especially Nigeria.
- However, it is still expensive to consumate and whilst opportunities remain for intra-Africa transferes.
- Some FinTechs have recognized this opportunity and are battling to disrupt to strong monopolies who have dominated the market for years.
- The also face several regulatory challenges and more importantly capital controls that has created a foreign currency disparity, just like in Nigeria.