Diaspora remittances to low and middle-income countries (LMICs), including Nigeria are projected to decline by 19.7 per cent to $445 billion, signifying a loss of a crucial financing lifeline for many vulnerable households, the World Bank has projected.
Although all regions of the world are expected to see big drops in 2020, remittance flows to the Sub-Saharan region are expected to decline by 23.1 per cent to stand at $37 billion in 2020, having totaled $48 billion in 2019.
Nigeria was among the top five countries in the world, which received about $613 billion in remittances in 2017.
Available data from the National Bureau of Statistics (NBS) indicate that remittances from Nigerians in Diaspora rose from $3.24 billion in 2013 to approximately $25.08 billion in 2018, signifying that Nigeria’s diaspora remittances rose by 126 per cent in six years (2013-2018). This also shows that Nigerians in Diaspora sent an estimated $96.5 billion to the country in six years, a major catalyst for the federal government’s floating of a $300 million Diaspora Bond in 2018.
However, the World Bank forecasts that global remittances are projected to decline sharply by about 20 per cent in 2020 due to the economic crisis induced by the COVID-19 pandemic and shutdown.
The projected fall, which would be the sharpest decline in recent history, is largely due to a fall in the wages and employment of migrant workers, who tend to be more vulnerable to loss of employment and wages during an economic crisis in a host country.
With African migrants in wealthier countries across Europe, North America, the Middle East and Asia losing jobs or subjected to pay cuts due to the coronavirus outbreak and the attendant lockdowns, a significant drop in remittances to their home counties is expected .
The Middle East countries, Asia, the United States of America , France, United Kingdom and China, account for up to a quarter of all funds remitted to African countries.
The International Labour Organisation (ILO) has already projected that disruption to the world’s economies caused by the COVID-19 pandemic is expected to wipe out 6.7 per cent of working hours globally in the second quarter of the year – the equivalent of 195 million jobs.
Studies show that remittances alleviate poverty in lower- and middle-income countries, improve nutritional outcomes, are associated with higher spending on education, and reduce child labour in disadvantaged households. A fall in remittances affect families’ ability to spend on these areas as more of their finances will be directed to solve food shortages and immediate livelihoods needs.
The World Bank Group President, David Malpass, said: “Remittances are a vital source of income for developing countries. The ongoing economic recession caused by COVID-19 is taking a severe toll on the ability to send money home and makes it all the more vital that we shorten the time to recovery for advanced
“Remittances help families afford food, healthcare, and basic needs. As the World Bank Group implements fast, broad action to support countries, we are working to keep remittance channels open and safeguard the poorest communities’ access to these most basic needs.”
The World Bank is assisting member-states in monitoring the flow of remittances through various channels, the costs and convenience of sending money, and regulations to protect financial integrity that affect remittance flows. It is working with the G20 countries and the global community to reduce remittance costs and improve financial inclusion for the poor.
Remittance flows are expected to fall across all World Bank Group regions, notably in Europe and Central Asia (27.5 percent), followed by Sub-Saharan Africa (23.1 percent), South Asia (22.1 per cent), the Middle East and North Africa (19.6 per cent), Latin America and the Caribbean (19.3 per cent), and East Asia and the Pacific (13 per cent).
The large decline in remittances flows in 2020 comes after remittances to LMICs reached a record $554 billion in 2019. Even with the decline, remittance flows are expected to become even more important as a source of external financing for LMICs as the fall in foreign direct investment is expected to be larger (more than 35 percent). In 2019, remittance flows to LMICs became larger than FDI, an important milestone for monitoring resource flows to developing countries.
In 2021, the World Bank estimates that remittances to LMICs will recover and rise by 5.6 per cent, from $445 billion to $470 billion. The outlook for remittance remains as uncertain as the impact of COVID-19 on the outlook for global growth and on the measures to restrain the spread of the disease. In the past, remittances have been counter-cyclical, where workers send more money home in times of crisis and hardship back home. This time, however, the pandemic has affected all countries, creating additional uncertainties.
“Effective social protection systems are crucial to safeguarding the poor and vulnerable during this crisis in both developing countries as well as advanced countries. In host countries, social protection interventions should also support migrant populations,” said Michal Rutkowski, Global Director of the Social Protection and Jobs Global Practice at the World Bank.
The global average cost of sending $200 remains high at 6.8 per cent in the first quarter of 2020, only slightly below the previous year. Sub-Saharan Africa continued to have the highest average cost, at about 9 per cent, yet intra-regional migrants in Sub-Saharan Africa comprise over two-thirds of all international migration from the region.
“Quick actions that make it easier to send and receive remittances can provide much-needed support to the lives of migrants and their families. These include treating remittance services as essential and making them more accessible to migrants,” said Dilip Ratha, lead author of the Brief and head of KNOMAD.
Remittance flows to the East Asia and Pacific region grew by 2.6 per cent to $147 billion in 2019, about 4.3 percentage points lower than the growth rate in 2018. In 2020, remittance flows are expected to decline by 13 per cent.
The slowdown is expected to be driven by declining inflows from the United States, the largest source of remittances to the region. Several remittance-dependent countries such as those in the Pacific Islands could see households at risk as remittance incomes decline over this period. A recovery of 7.5 per cent growth for the region is anticipated in 2021.