Strength from abroad: The economic power of Nigeria’s diaspora

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Official records indicate that there are 1.24 million migrants from Nigeria in the diaspora (United Nations, 2017). This figure is likely to be higher in 2018 and 2019 with the recent trend in migration from the country. Almost half of the Nigerian adults have indicated their willingness to leave the country in the next five years, according to a 2018 survey conducted by the Pew Research Centre.

Consequently, Nigeria accounts for over a third of migrant remittance flows to Sub-Saharan Africa. PwC estimated that these flows amounted to US$23.63 billion (2017: US$22 billion) in 2018, and represented 6.1% of Nigeria’s GDP.

The 2018 migrant remittances translate to 83% of the Federal Government budget in 2018 and 11 times the FDI flows in the same period.

Nigeria’s remittance inflows were also 7.4 times larger than the net official development assistance (foreign aid) received in 2017 of US$3.4 billion. PwC estimates that migrant remittances to Nigeria could grow to US$25.5bn, US$29.8bn and US$34.8bn in 2019, 2021 and 2023 respectively. Over a 15-year period, PwC expects total remittance flows to Nigeria to grow by almost double in size from US$18.37 billion in 2009 to US$34.89 billion in 2023. The growth in remittances is subject to global economic forces, which could spur or hinder the growth of remittance flows, Other factors that will drive remittance flows include growth in emigration rate, economic conditions of the resident countries and the economic fundamentals in the Nigerian economy. The World Bank forecasts global growth to slow to 2.6% in 2019.

According to the IMF, remittances represent household income from foreign economies arising mainly from the temporary or permanent movement of people to those economies. Remittances include cash and noncash items that flow through formal channels such as electronic wire, or through informal channels, such as money or goods carried across borders.

The importance of remittances is in the role they play in economies. They help poorer recipients meet basic needs, fund cash and non-cash investments, finance education, foster new businesses, service debt and essentially, drive economic growth. Empirical studies show that the primary benefits of remittances to recipient households is the improvement in their general welfare. According to analysts, 70% of remittances are used for consumption purposes, while 30% of remittance funds go to investment-related uses.

Global remittances and trends

The World Bank estimated that global remittances grew by 10% to $689 billion (2017: $633 billion) in 2018, with developing countries receiving 77% or $528 billion of the total inflows. India, China, Mexico, the Philippines and Egypt are among the largest remittance recipients globally, collectively accounting for approximately 36% of total inflows.

The officially recorded remittances are much lower than the actual remittances that take place through official and unofficial channels. Remittances through informal channels could add at least 50% to the globally recorded flows (World Bank, 2006, ibid. 85). Freund and Spatafora (2005) estimate informal remittances to amount to between 35 and 75% of officially recorded flows.

Full report: the economic power of Nigerian diaspora