Nigeria loses 10% in $575 billion global remittances
Nigeria had its fair share of the global economic challenges and frequent regulatory intervention aimed at taming money laundering, as its remittance record in 2016 declined by 10 per cent out of the $575 billion global figure.
Consequently, the remittances to developing countries as a whole also fell for a second consecutive year, a trend that was not seen in three decades, according to the latest edition of the Migration and Development Brief, unveiled by the World Bank.
The report, unveiled by the multilateral institution at the ongoing IMF/World Bank Spring Meetings in Washington DC, noted that remittances to developing countries were $429 billion in 2016, a decline of 2.4 per cent over $440 billion in 2015.
Specifically, flows to Sub-Saharan Africa declined by an estimated 6.1 per cent to $33 billion in 2016, from about $36.3 billion in 2015, due to slow economic growth in remittance-sending countries and decline in commodity prices, especially crude oil, which impacted remittance receiving countries like Nigeria.
Also, the diversion of remittances to informal channels due to controlled exchange rate regimes in Nigeria, affected the remittance records, particularly for the country.
But in keeping with an improved global economic outlook, remittances to developing countries are expected to recover this year, growing by an estimated 3.3 per cent to $444 billion in 2017.
Global remittances, which include flows to high-income countries contracted by 1.2 per cent to $575 billion in 2016, from $582 billion in 2015.However, the global average cost of sending $200 remained flat at 7.45 per cent in the first quarter of 2017, although this was significantly higher than the Sustainable Development Goal (SDG) target of three per cent.
Sub-Saharan Africa, which Nigerian economy dominates, has an average cost of 9.8 per cent and remains the highest-cost region.The bank noted that a major barrier to reducing remittance costs is de-risking by international banks, due to the closure of bank accounts of some money transfer operators to cope with the high regulatory burden aimed at reducing money laundering and financial crime.
“This has posed a major challenge to the provision and cost of remittance services to certain regions. Remittances are an important source of income for millions of families in developing countries. As such, a weakening of remittance flows can have a serious impact on the ability of families to get healthcare, education, or proper nutrition,” the Acting Director of the World Bank’s Global Indicators Group, Rita Ramalho, said.
While Nigeria lost by 10 per cent, Bangladesh fell by 11.1 per cent and Egypt, 9.5 per cent, with exceptions among major remittance recipients being Mexico, and the Philippines, which saw inflows increase by 8.8 per cent and 4.9 per cent, respectively.
According to the report, low oil prices and weak economic growth in the Gulf Cooperation Council countries, and the Russian Federation, took toll on remittance flows to South Asia and Central Asia, while weak growth in Europe reduced flows to North and Sub-Saharan Africa, and made worse by a weaker euro, British pound and Russian rubble against the dollar.
India still retained top spot as the world’s largest remittance recipient, led the decline with remittance inflows amounting to $62.7 billion last year, a decrease of 8.9 per cent over $68.9 billion in 2015.
Already, several high-income countries that are host to many migrants are considering taxation of outward remittances, partly to raise revenue and to discourage undocumented migrants.
However, taxes on remittances are seen as difficult to administer and likely to drive the flows underground, particularly now refugees worldwide increased by 1.4 million, to 16.5 million.
“Migration will almost certainly increase in the future due to large income gaps, widespread youth unemployment, ageing populations in many developed countries, climate change, fragility and conflict.
“Currently, the global migration architecture is fragmented and undefined. The global community needs to systematically map the current institutional framework, clarify the missions of key organisations, and develop normative guidelines by building on existing conventions that address migration,” the Lead Author of the Brief, and Head of the Global Knowledge Partnership on Migration and Development, Dilip Ratha, said.
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