The pan-African credit rating agency, Agusto & Co has projected that Nigeria’s diaspora remittances will reach $22 billion by 2021, representing a year-on-year (y-o-y) rise of five percent.
The Lagos-based firm stated this in its “2021 Nigeria Diaspora Remittance Report & Survey,” presented to members of the public.
The report anticipated a further y-o-y rise of two percent in remittances inflow to $22.5 billion by 2022. According to the report, Nigeria’s diaspora remittances dropped by 12 percent to $21 billion in 2020, from about $23.8 billion the prior year.
Head of Research at Agusto Consulting, Mr. Jimi Ogbobine, while speaking during a webinar on the report, explained that the Nigerian diaspora remittances are still an under-researched subject despite its strong bankability credentials.
He said there have been very few target-market studies on diaspora remittances in Nigeria, adding that Agusto Consulting adopted a strategy by initiating research on bankable markets with poor research coverage.
Remittances are funds transferred from migrants to their home country. They represent household income from foreign economies arising mainly from the temporary or permanent movement of people to those economies.
Remittances play important roles in the economy, helping to meet the basic needs of recipients, fund cash and non-cash investments, finance education, foster new businesses, service debts and drive economic growth.
“Previous studies have also shown that about 70 percent of remittances are used for consumption purposes, while 30 percent of remittance funds go to investment-related use,” Ogbobine explained.
He pointed out that Africa’s estimated migrant remittances of $78.3 billion in 2020 represented a modest 12 percent of the global migrant remittances.
“However, only two states within the continent represent about three-fifths of the continent’s entire migrant remittances. Egypt’s diaspora remittances of $24.4 billion in 2020 are not only the largest in Africa but also represent about a third (31.1 percent) of the continent’s entire migrant remittance.
“Nigeria ranks behind Egypt with $21 billion which represents about a quarter of the continent’s global remittances. Morocco driven by its large French diaspora represents about eight percent of the continent‘s remittance inflows with $6.3 billion. Zimbabwe continues to suffer the effects of the dysfunction in its forex regime,” it added.
According to the report, all of Africa’s top seven diaspora recipients experienced dips in remittance inflows in 2020, barring Kenya alone which grew by 2.8 percent. It revealed that Nigeria recorded the worst contractions amongst Africa’s top seven in 2020 of about 11.9 percent.
“Nigeria’s domestic policy conundrum on foreign exchange creating as many challenges to the wider macro contractions caused by the pandemic. Outside Nigeria and Kenya, the other states within the top seven bracket experienced varying degrees of contraction in diaspora remittances of between five percent to 9.4 percent in 2020,” it added.
Diaspora remittances to Africa declined by an estimated 12.5 percent in 2020 to $42 billion, almost entirely due to a 27.7 percent decline to Nigeria, which accounts for over 40 percent of such flows to the region, the World Bank recently disclosed. The Bank, in its latest Migration and Development Brief, revealed that excluding Nigeria, remittance flows to Africa increased by 2.3 percent with a 37 percent growth reported in Zambia, Mozambique (16 percent), Kenya (9 percent) and Ghana (5 percent).
It stated: “Remittances to Sub-Saharan Africa declined by an estimated 12.5 percent 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 percent of remittance flows to the region.
“Excluding Nigeria, remittance flows to Sub-Saharan African increased by 2.3 percent. Remittance growth was reported in Zambia (37 percent), Mozambique (16 percent), Kenya (9 percent) and Ghana (5 percent).”
In 2021, remittance flows to the region are projected to rise by 2.6 percent, 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 inflows.
“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 percent in the fourth quarter of 2020.
Modulus CEO: G7 Statement of Principles is Acknowledgement of CBDC Future
Recently, G7 officials broadcast a joint statement noting that CBDCs would complement cash and that any such payment system should follow a series of principles they laid out. The statement, they indicated, was a place for sovereign nations to begin as they developed policy and designed the technological pieces necessary for a digital currency launch. Perhaps most notably, the statement indicated that CBDCs must “do no harm to the ability of central banks to fulfill their mandates for monetary and financial stability.”
“I’ve been saying, for years, that regulatory bodies needed to wrap their arms around the concept of digital assets. In order to regulate something, you need to first understand it, both theoretically and practically. Once the regulators understand it, they need to put together common sense guidance that protects the citizenry from bad actors while allowing innovators to do what they do best: innovate,” said Richard Gardner, CEO of Modulus, a US-based developer of ultra-high-performance trading and surveillance technology that powers global equities, derivatives, and digital asset exchanges.
“In essence, those same principles exist when deciding what a CBDC should look like. There needs to be a certain standard of privacy for users. In the United States, Senator Lummis has noted this on multiple occasions. CBDCs shouldn’t be an authoritarian power grab to allow the government access to every penny spent by its citizenry,” Gardner said.
“In addition, before a central bank can even begin to think about releasing a CBDC to the public, they need to have their technological infrastructure buttoned up. Before the beta test even begins, the cybersecurity aspects surrounding the program must be on point. Of course, the beta testing will allow you to fix any vulnerabilities with the proposed technology, but we must build out a CBDC program beginning with security at its core, rather than as an afterthought. Any logical human would conclude the same thing. There’s nothing surprising here,” said Gardner.
“Notably, they also considered how CBDCs would be energy efficient, and I think that’s an area where the industry needs to spend some time, perhaps even in partnership with some of the great minds in sustainability. If you look at how the private sector has come to view sustainability over the past decade, I think there’s already a roadmap in place. The idea is to look at ways to make the business case to be sustainable. Once we flipped the script and looked at it through that lens, there was a great deal of ingenuity that truly transformed business models. There’s no reason that we can’t build the business case for CBDCs with that sustainable vision in mind,” noted Gardner.
Modulus is known throughout the financial technology segment as a leader in the development of ultra-high frequency trading systems and blockchain technologies. Modulus has provided its exchange solution to some of the industry’s most profitable digital asset exchanges, including a well-known multi-billion-dollar cryptocurrency exchange. Over the past twenty years, the company has built technology for the world’s most notable institutions, with a client list which includes NASA, NASDAQ, Goldman Sachs, Merrill Lynch, JP Morgan Chase, Bank of America, Barclays, Siemens, Shell, Yahoo!, Microsoft, Cornell University, and the University of Chicago.
“You’re going to want the regulators in on this, you’re going to want innovators who understand the technology… but the citizenry is also going to want the transparency advocates to have a seat at the table. There needs to be a clear understanding of what privacy expectations users can have and how information will be used. Perhaps even more importantly, how will it be secured? And, what are the steps if there is a data leak? Those are all important questions to ask as central banks develop their programs,” noted Gardner.
African Development Bank Group and MTN Nigeria Sign $500,000 Grant Agreement to Study Women’s Access to Financial
The African Development Bank has signed a grant agreement for $500,000 with Y’ello Digital Financial Services (YDFS), a fintech subsidiary of MTN Nigeria, to be used for a study into economic, religious, and social factors hampering access to finance for women in northern Nigeria.
The research, which includes a feasibility study, women-focused design and testing, will focus on both agents and customers to provide insights into women’s use of mobile money services, will be funded through the Africa Digital Financial Inclusion Facility (ADFI).
Despite being the continent’s largest economy, 55% of rural Nigerians still lack access to financial services . The rate of mobile money adoption currently stands at 4% , with an agent ratio of 228.8 agents per 1,000 adults . Political instability and conservative cultural norms in parts of Northern Nigeria are thought to present barriers to women’s access to finance. Additionally, 80% of agents in the region are men.
“The African Development Bank, through the Africa Digital Financial Inclusion Facility (ADFI), is delighted to support this project, furthering our work to improve the quality of life for people in Nigeria and contribute to the Sustainable Development Goals, particularly as relates to poverty, and gender inclusion,” said Stefan Nalletamby, African Development Bank Director of Financial Sector Development.
On behalf of YDFS, Usoro Usoro, Chief Executive Officer, said, “We are truly excited about this partnership with the African Development Bank, and the possibilities for advancing financial inclusion in Nigeria, particularly for the traditionally excluded segment of women in Northern Nigeria.”
African Development Bank Group President Akinwumi Adesina Assures Nigeria of Bank’s Strong Support to Achieve Food Security
The President of the African Development Bank Group, Dr. Akinwumi Adesina, received a high-level Nigerian delegation led by the country’s Minister of Agriculture and Rural Development, Dr. Mohammad Mahmood Abubakar on Monday.
The meeting follows on the heels of an address by Dr. Adesina last week at a mid-term ministerial retreat presided over by President Muhammadu Buhari.
Dr. Adesina and the Nigerian minister discussed means of tackling growing concerns about the country’s food security.
Adesina said the Bank’s strategic support for Nigeria’s food production would be hinged on five factors: support, scale, systemic, speed, and sustainability.
He added, “I want to assure President Buhari that the African Development Bank will provide his government with very strong support to tackle the country’s food security challenges.”
“Inflation in Nigeria is high, at 16% or more. Of course, the biggest share of the consumer price index is the price of food, at almost 65%. So, if we can drive down the price of food, of course, we can drive down inflation.“
Adesina urged the Nigerian minister to concentrate on building the correct team and tactics to optimize the country’s farming seasons. He said that dramatically increased food output will result in lower food prices, which will in turn lower inflation rates.
Abubakar said his consultative mission to Abidjan was at the instruction of President Buhari.
“Our mission is to examine ways Nigeria could enhance food production, lower food prices, and create wealth,” the minister said.
Abubakar welcomed the Bank’s proposed strategy and described it as a landmark one that would spur Nigeria’s food supply production. “It will reverse the ugly trend of a sharp increase in prices of food in the country. I am pleased with the Bank’s strategy to facilitate the production of 9 million metric tons of food in Nigeria and to support us in raising self-sufficiency. The Bank’s Special Agro-Processing Zones initiative is a laudable one and Nigeria is grateful.”
Citing successes in Sudan, Adesina explained how the African Development Bank had supported the country with 65,000 metric tonnes of heat-tolerant wheat varieties, cultivated on 317,000 hectares.
“It took two seasons to do this,” he said. “Change will not happen in years. You will see changes in seasons. Sudan now produces 1.1 million metric tons of wheat. The same thing happened in Ethiopia in just two seasons with the production of 184, 000 hectares of wheat,“ he added.
In response to Bank successes in Sudan and Ethiopia, Abubakar said: “This gives me an additional measure of confidence. If you can do it in Sudan, you can equally do it in Nigeria. Not just in wheat, but also rice, maize, and soybeans.”
The African Development Bank will provide Nigeria with support through input delivery, including highly improved seeds and fertilizers to farmers, and an integrated input delivery platform.
Extensively discussed at the meeting was the Bank’s Special Agro-Industrial Processing Zone initiative as an effective medium-term plan for revolutionizing Nigeria’s agriculture value chain.
Adesina said: “The task, responsibility, and challenge of feeding Nigeria rests on your shoulders. You will receive maximum support from me, and the African Development Bank for the responsibility that President Buhari has given you. You will not be alone.”
He added: “The Bank stands ready to fully support and help Nigeria in the next farming seasons. So, we must make sure things turn around. The president must succeed, and Nigeria must succeed. Agriculture must succeed.”
Abubakar thanked the African Development Bank for its support and said the meeting gave him reassurances of what Nigeria can achieve with the Bank’s support in the farming seasons ahead.
The minister also called for the Bank’s support to recapitalize the country’s Bank of Agriculture. Both parties set up a task force team to develop a plan for accelerated implementation within the next 60 days.
Also at the meeting were a member of Nigeria’s National Assembly, Hon. Munir Baba Dan Agundi, Chair of the House Committee on Agricultural Colleges and Institutions; the African Development Bank’s executive director for Nigeria, Sao Tome and Principe, Dr. Oyebode Oyetunde; Vice President of Agriculture, Human and Social Development, Beth Dunford; Senior Special Advisor to the President of the Bank on Industrialization, Professor Oyebanji Oyelaran; Director General of the Bank’s Nigeria Country Office in Abuja, Lamin Barrow; the Bank’s Director of Agriculture and Agro-Industries, Martin Fregene; the Director for Agricultural Finance and Rural Development, Atsuko Toda; and senior officials from Nigeria’s Federal Ministry of Agriculture.
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