Friday, November 12, 2010

In 2009, Nigeria received $10 billion in remittances from citizens living in the diaspora. One year later, the country is in the top 10 of remittance-recipient countries, having again received at least $10bn from the diaspora.

The rankings, as categorized in the Migration And Remittances Factbook 2011, are as follows:
  1. India - $55 billion
  2. China - $51 billion
  3. Mexico - $22.6 billion
  4. Philippines - $21.3 billion
  5. France - $15.9 billion
  6. Germany - $11.6 billion
  7. Bangladesh $11.1 billion
  8. Belgium - $10.4 billion
  9. Spain - $10.2 billion
  10. Nigeria - $10 billion
Top countries from which remittances are sent around the world are the United States, Saudi Arabia, Switzerland, Russia, and Germany.

However, Nigeria fell a few spots from 6 to 10 between last year and the present ranking. Despite that, the remittance amount remained the same at $10 billion. But, the World Bank specifically lists Nigeria as a country that has lagging and/or incomplete information on remittances. [1] Therefore, the actual amount of remittances to Nigeria is likely larger. Plus, given the amount of money that is sent through informal channels outside of the traditional means (money transfer services or banks), Nigeria could rank higher on the list in reality. In fact, the average Nigerian doctor living in the US sent more than $5000 to Nigeria in 2009. Remittances are expected to increase in 2011 and 2012 and it shall be interesting to see if remittances to Nigeria increase as well.

Given the global economic meltdown, it is not surprising that Nigerian remittances stalled. It is actually a good thing that the number didn't drop. Many in Nigeria rely on remittances from abroad to make ends meet in a country with cities that rank as some of the most expensive in the world, one such city being Lagos. That, in addition to the fact that many Nigerians have expensive tastes in an economy where wealth stays mainly within the reach of the powerful economic and political elite, means that remittances will continue to be a significant source of income for Nigerians at home.

Remittances, however, are only a small part of Nigeria's GDP. In 2005, remittances constituted 5% of the national GDP and in 2009, it was 5.6% of GDP. [2] That represented a minor increase over the last few years. Given the importance of oil as a major import - it accounted for 40% of GDP as of May 2010 - and other growing sectors such as agriculture (33% in 2009), industry (34% in 2009) and services (23% in 2009), remittances may remain an important but not as significant part of the Nigerian economy.

It must be said that Nigeria would do well to make the receipt and sending of money much easier. The main money transfer agents, MoneyGram and Western Union, operate primarily out of banks. However, some banks now only allow bank customers to receive remittances from abroad and such monies must be deposited directly into a bank account. While that benefits the bank's bottom line, it can make money off of the funds sent to local customers, that process is cumbersome for the average Nigerian that might not be able to open a bank account.

Furthermore, traditional money transfer agents and even the newer online ones do not allow Nigerians to send money outside the country. This leaves formal banks as the primary means of sending money abroad. While this measure was undoubtedly put in place to counter corruption, it places an undue burden on ordinary individuals trying to support their student-children abroad or other relatives. These and other restrictions on the flow of money into and out of Nigeria are detrimental in the long term especially because a credit crunch in Nigeria means that most people have to rely on family members and friends to finance not just daily life but business enterprises be they big or small.

In due time, Nigeria will likely have to make the flow of money via remittances much easier. It will have to do so as Nigerians continue to depend on these monies to live. When that happens, it will be interesting to see how Nigeria stands on future World Bank reports. It will be more interesting to see how such remittances are used by Nigerians at home.

[1] - Migration And Remittances Factbook 2011, p. 18.

[2] - Ibid., p. 56. 

From The Archives:
- Nigerias $10 bn in Remittances (2009)

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