Nigeria’s diaspora remittances rose to $19.5 billion in 2023, according to the latest Migration and Development Brief from the World Bank.
Despite falling slightly short of the projected $20 billion, this figure remains the highest in the sub-Saharan African region, accounting for 35% of the total remittances received in the area.
The report highlights the critical role remittances play in supporting the Nigerian economy, surpassing foreign direct investment (FDI) and official development assistance (ODA) in terms of financial inflow.
The World Bank’s report underscores the importance of leveraging remittances to combat poverty and finance key needs such as health, education, and financial inclusion.
While acknowledging that remittances cannot replace FDI or ODA, the report emphasizes the resilience and significant impact of these funds in supporting the country’s economic stability and development.
“Developing countries need FDI, especially in critical infrastructure and green investments, and ODA to address public financing needs and externalities such as fragility and climate change,” the report stated.
“However, countries must recognize the size and resilience of remittances and find ways to leverage these flows for poverty reduction and other key areas.”
Despite the high volume of remittances, sub-Saharan Africa continues to face the highest remittance costs globally, averaging 7.9%.
These costs encompass bank charges, money transfer operator fees, and various duties, which can reduce the net amount received by beneficiaries.
Also, the report notes that non-transparent foreign exchange markups often mask these fees, further impacting the final amount received.
The report also pointed out that in countries with multiple exchange rates, remittances often flow through unregulated channels, depriving recipient countries of vital foreign exchange.
This practice is prevalent in Nigeria, where many remittances are sent through informal routes, avoiding the official exchange rates and contributing to the externalization of funds.
Earlier this year, Taiwo Oyedele, Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, highlighted the discrepancy between reported remittances and actual inflows during a panel discussion at the 2024 Economic Outlook and Budget Analysis organized by the Lagos Chamber of Commerce and Industry.
Oyedele noted that while the World Bank estimated Nigeria’s diaspora remittances at $20 billion for 2023, more than 90% of these funds did not enter the country formally.
“We have spoken to many Nigerians almost everywhere, and they told us how they send money now. They use digital apps that utilize parallel market rates, crediting naira in Nigeria without bringing in the dollars,” Oyedele explained.
