Nigeria’s external remittances drop by 10% in 2016

The nation contraction in several countries of the world took a toll on global remittances as the World Bank, Thursday, reported that fund transfers to developing countries fell for a second consecutive year in 2016, a trend not seen in three decades.

According to the latest edition of the Migration and Development Brief, released at the World Bank’s Spring Meetings in Washington DC,USA, officially recorded remittances to developing countries amounted to $429 billion in 2016, representing a decline of 2.4 percent over $440 billion in 2015.

The report shows that global remittances, which include flows to high-income countries, contracted by 1.2 percent to $575 billion in 2016, from $582 billion in 2015.

It also reveals that Inflows from Nigerians in the Diaspora fell by -10 per cent in line with an estimated 6.1 percent drop to $33 billion in 2016, for subsaharan Africa, due largely to slow economic growth in remittance-sending countries; decline in commodity prices, especially oil, which impacted remittance receiving countries; and diversion of remittances to informal channels due to controlled exchange rate regimes in countries like Nigeria where government attempted to implement capital controls to mitigate shortages in resource inflows arising from low oil sales.

Remittances to the region are projected to increase by 3.3 percent to $34 billion in 2017.

Recall that Nigeria was last year confronted with acute shortage of foreign currencies which forced the Central Bank of Nigeria to opt for capital controls to manage sharp drop in oil receipts.

According to the World Bank, low oil prices and weak economic growth in the Gulf Cooperation Council (GCC) countries and the Russian Federation are taking a toll on remittance flows to South Asia and Central Asia, while weak growth in Europe has reduced flows to North Africa and Sub-Saharan Africa.

The decline in remittances, when valued in U.S. dollars, was made worse by a weaker euro, British pound and Russian ruble against the U.S. dollar.

As a result, many large remittance-receiving countries saw sharp declines in remittance flows. India, while retaining its top spot as the world’s largest remittance recipient, led the decline with remittance inflows amounting to $62.7 billion last year, a decrease of 8.9 percent over $68.9 billion in 2015.

Remittances to other major receiving countries are also estimated to have fallen last year, including Bangladesh (-11.1 percent), Nigeria (-10 percent), and Egypt (-9.5 percent).

The exceptions among major remittance recipients were Mexico and the Philippines, which saw inflows increase by an estimated 8.8 percent and 4.9 percent, respectively, last year.

“Remittances are an important source of income for millions of families in developing countries. As such, a weakening of remittance flows can have a serious impact on the ability of families to get health care, education or proper nutrition,” said Rita Ramalho, Acting Director of the World Bank’s Global Indicators Group.

In keeping with an improved global economic outlook, remittances to developing countries are expected to recover this year, growing by an estimated 3.3 percent to $444 billion in 2017.

The global average cost of sending $200 remained flat at 7.45 percent in the first quarter of 2017, although this was significantly higher than the Sustainable Development Goal (SDG) target of 3 percent. Sub-Saharan Africa, with an average cost of 9.8 percent, remains the highest-cost region.

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