PWC to FG: Develop Policies to Harness N9tn Remittances

To grow from US$18.37 billion in 2009 to US$34.89 billion in 2023

Obinna Chima

In order to ensure that the $25 billion (N9 trillion) annual remittances to Nigeria are utilised in ways that are beneﬁcial to the economy, the federal government has been advised to develop a coherent policy framework to harness the inflows into generating capital for productive investments for the growth and development of small and micro-enterprises, which will in turn, create employment.

But it stressed that the extent to which the diaspora contributes to the developmental affairs of a country would be determined largely by trust.

This formed part of the recommendations by PriceWaterhouseCoopers (PwC) Nigeria, a multinational professional services firm, in a report titled: “Strength from Abroad – The Economic Power of Nigeria’s Diaspora,” obtained Saturday.

Ofﬁcial records indicate that there are 1.24 million migrants from Nigeria in the diaspora (United Nations, 2017). This ﬁgure was likely to be higher in 2018 and 2019 with the recent trend in migration from the country.

Almost half of Nigerian adults had 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.

In 2018, migrant remittances to Nigeria equalled $25 billion, representing 6.1 per cent of the country’s Gross Domestic Product (GDP). This also represents 14 per cent year-on-year growth from the $22 billion receipt in 2017. The 2018 ﬁgure translates to 83 per cent of the federal government budget in 2018 and 11 times the Foreign Direct Investment (FDI) ﬂows in the same period.
Nigeria’s remittance inﬂows was also seven times larger than the net ofﬁcial development assistance (foreign aid) received in 2017 (US$3.4 billion.)

Owing to these, the eight-page report stressed that it was evident that remittances could have a strong impact on development, both at the macro and micro- level, especially as it has a multiplier effect on consumption, investment and economic growth.
The firm therefore called for the creation of platforms that increase accessibility of crucial information for Nigerians in the Diaspora, adding that Nigerian diaspora constitutes mainly semi-skilled, skilled and highly skilled professionals.

“They are in need of credible opportunities of investment with assured returns on their savings and earnings. A platform where information on opportunities can be shared will help to reduce information asymmetry when it comes to investment opportunities.

“Also, it is strategically important for state governments to also adopt these platforms to drive and attract remittance ﬂows from migrant indigenes toward consumption, investment and development in their respective sub-nationals,” it added.
The firm also called for the creation of pooled investment vehicles, stating that one of the major barriers to investing for those in the diaspora was the minimum amount of funds, which investing ﬁrms accept.

Therefore, it noted that pooled investment vehicles, where members of Diaspora could be vetted and could aggregate funds for private equity investment for example, would encourage greater investments.

Furthermore, it noted that early-stage businesses with smaller ﬁnancing needs, present another great opportunity for those in the diaspora to invest through angel networks. “Facilitating these investment options in small-scale and medium-scale enterprises, joint ventures and micro-credits become pragmatic and viable opportunities for the diaspora.

“Such efforts will also encourage employment-generating activities, reduce further emigration and save workers from exploitative conditions abroad by providing them alternative livelihood options in their own country,” it added.
Evaluating the cost of remittances and technology, PwC Nigeria stated that the global average cost of sending $200 was 7.1 per cent in the ﬁrst quarter of 2018, more than twice as high as the Sustainable Development Goal 10 target of reducing the transaction costs of migrant remittances to less than three per cent.

Sub-Saharan Africa remains the most expensive place to send money to, where the average cost is 9.4 per cent (about 25% higher there than in the rest of world), it pointed out.

However, the firm stated these costs have been decreasing over the last 10 years, partly because of the rise of mobile money technology.

“Today, mobile money transfers are two times less expensive than money transfer operators and post ofﬁces, and almost three times less costly than transfers through commercial banks. “As mobile money technology continues to expand, and its coverage and usage continue to increase across Sub-Saharan Africa, it is expected to contribute to an increase in remittance ﬂows.

“Several countries across the globe, including Nigeria, have developed plans towards attracting investment from their diaspora community for national development.

Sub-national governments (states) across most of these countries are also tapping into the immense opportunities in the diaspora space.

In summary, what is required is a coherent policy framework to harness remittances into generating capital for productive investments for the growth and development of small and micro-enterprises, which will in turn, create employment. In addition, remittances can be deployed toward philanthropic activities which can serve as solutions for speciﬁc deﬁciencies in the local infrastructure such as schools, hospitals and roads.

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, according to the report, would be subject to global economic forces, which could spur or hinder growth of remittance ﬂows.

Other factors that would drive remittance ﬂows include growth in emigration rate, economic conditions of the resident countries and the economic fundamentals in the Nigerian economy.

“Since many transactions are unrecorded or take place through informal channels, the actual amount of remittance ﬂows into the country is arguably higher,” it added.