The World Bank has urged Nigeria to capitalize on its diaspora remittances to combat poverty and finance critical development needs.
In its latest Migration and Development Brief, the international lender highlighted that Nigeria’s diaspora inflow stood at $19.5 billion in 2023, the highest in the sub-Saharan African region, representing 35% of the total inflows.
Despite the figure falling slightly short of the projected $20 billion, the World Bank explained the importance of these funds, noting that remittances outpaced Foreign Direct Investment (FDI) and Official Development Assistance (ODA) in many developing countries.
This trend, driven by migration pressures, demographic changes, income disparities, and climate change, is expected to continue.
The World Bank report stressed that while remittances should not replace FDI or ODA, they offer a resilient source of funds that can be leveraged for poverty reduction, health and education financing, financial inclusion, and improved access to capital markets.
The bank urged countries like Nigeria to recognize the size and stability of remittance flows and to develop strategies to harness these funds effectively.
“Given the multiparty arrangement in the new government, we see some upside potential for reforms, which could accelerate given greater accountability and oversight,” Goldman Sachs International Inc. economist Andrew Matheny stated. “However, the coalition might ultimately prove fragile.”
The report highlighted the high cost of remittances to sub-Saharan Africa, averaging 7.9%, which includes bank charges, money transfer operator fees, and other levies.
It also pointed out that in countries with multiple exchange rates, remittances often flow through unregulated channels, depriving the recipient country of access to foreign exchange.
Earlier this year, Taiwo Oyedele, Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, noted that while the World Bank estimated Nigeria’s diaspora remittances at $20 billion for 2023, more than 90% of these funds did not physically enter the country.
“We have spoken to many Nigerians almost everywhere, and they told us how they send money now. They use digital apps. They use parallel market rates. So, they credit naira here in Nigeria without bringing the dollars,” Oyedele explained during a panel discussion at the 2024 Economic Outlook and Budget Analysis organized by the Lagos Chamber of Commerce and Industry.
In response to these challenges, the Central Bank of Nigeria has granted preliminary approval to 14 International Money Transfer Operators to strengthen formal remittance channels.
The World Bank’s call to action underscores the critical role that diaspora funds can play in Nigeria’s economic development.
By implementing policies to effectively leverage these inflows, Nigeria can address key issues such as poverty, healthcare, education, and infrastructure, ultimately fostering a more inclusive and sustainable economic growth.
