Diaspora (Commonwealth Union) _ Nigeria solidified its position as the largest recipient of diaspora remittances in Sub-Saharan Africa in 2023, capturing approximately 35% of the region’s total inflows. A World Bank report revealed that Nigeria received around $19.5 billion, despite a 2.9% decline from the previous year. This inflow surpasses other significant recipients like Ghana and Kenya, which garnered $4.6 billion and $4.2 billion, respectively.
The report highlighted that diaspora remittances are critical to the economies of several African nations, constituting up to one-fifth of the GDP in countries such as Gambia, Lesotho, Comoros, Liberia, and Cabo Verde. However, the high remittance costs in Sub-Saharan Africa, averaging 7.9%, pose a challenge, encompassing bank charges, money transfer operator fees, and other levies.
Despite Nigeria’s significant inflows, only about 10% of these funds enter the formal foreign exchange (FX) market. Taiwo Oyedele, chairman of the presidential tax reforms committee, indicated that the majority of remittances are transferred via digital apps, bypassing the formal FX channels and contributing to the liquidity shortfall in Nigeria’s FX market.
In response to this, the Central Bank of Nigeria (CBN) has initiated reforms aimed at enhancing the flow of diaspora funds into the official FX market. CBN Governor Yemi Cardoso announced the formation of a committee dedicated to increasing remittance inflows through international monetary transfer operators (IMTOs). This initiative has begun to show promising results, with a noticeable uptick in formal remittances.
Cardoso emphasized the importance of leveraging the significant role played by the Nigerian diaspora in bolstering the nation’s economy. The CBN’s efforts include unifying the FX market windows and implementing new operational guidelines for commercial banks, Bureau de Change operators, and IMTOs. These measures are part of a broader strategy to stabilize Nigeria’s FX market and maximize the economic impact of remittances.
The World Bank acknowledged these reforms in its report, noting the potential for improved remittance flows and economic stability. As Nigeria navigates its economic challenges, the effective management of diaspora remittances will be crucial in supporting national development and growth.
