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The World Bank has projected that diaspora remittances to Nigeria will exceed $20 billion by the end of 2023, contributing to the total remittances in the Sub-Saharan Africa region, which is expected to grow by 1.9 percent. This revelation comes from the World Bank’s latest Migration and Development Brief released this month, emphasizing that global remittance flows will continue to expand in 2023, albeit at a slower pace.
The report states, “Remittances to Sub-Saharan Africa are estimated to grow by 1.9 percent from $53 billion in 2022 to $54 billion in 2023. Projections indicate that remittances to the region will keep increasing, reaching $55 billion by 2024. The slowed growth in remittances observed in 2023 is explained by the slow pace of growth in the high-income economies where many Sub-Saharan African migrants earn their income.”
It highlights that remittances to Nigeria, constituting 38 percent of remittance flows to the region, experienced a growth of about two percent. Other major recipients, Ghana and Kenya, recorded estimated gains of 5.6 percent and 3.8 percent, respectively. The report notes that fixed exchange rates and capital controls are redirecting remittances from official to unofficial channels.
“In 2024, remittance flows to the region are projected to increase by 2.5 percent. Remittances from the United States have remained stable. Although the euro area has recovered, its output remains 2.2 percent below pre-pandemic projections,” the report adds.
At the current official exchange rate of N885.88 per dollar, the anticipated total diaspora remittance is estimated at N17.717 trillion. Remittances are identified as a crucial source of financing for the Sub-Saharan Africa region, surpassing the stability of Foreign Direct Investments (FDI) that have shown significant volatility over the past two decades. In 2023, remittances to the region significantly exceeded FDI flows.
The report also highlights regional growth in remittances, driven by substantial increases in Rwanda (16.8 percent), Ethiopia (16 percent), and Mozambique (48.5 percent). Nigeria, the largest remittance recipient in Sub-Saharan Africa, is expected to receive over $20 billion in official remittances by the end of 2023, a slight increase compared to the previous year.
In terms of remittance costs, the World Bank report notes that Sub-Saharan Africa remains the region with the highest remittance costs, with the average cost of sending $200 slightly increasing to 7.9 percent in 2023Q2 compared to 7.2 percent in 2022Q2.
Commenting on the report, Iffath Sharif, the Global Director of the Social Protection and Jobs Global Practice at the World Bank, emphasized the importance of inclusive labor markets and social protection policies to support migrants whose remittances play a vital role in developing countries during crises.
Lead economist and lead author of the report, Dilip Ratha, highlighted, “Remittances are one of the few sources of private external finance that are expected to continue to grow in the coming decade. They must be leveraged for private capital mobilization to support development finance, especially via diaspora bonds.” Ratha pointed out that remittance flows to developing countries have surpassed the sum of foreign direct investment and official development assistance in recent years, with the gap continuing to widen.
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