Nigerians in the diaspora appear to be showing less love to their own at home. Show love is the street term for sharing money or gifts with friends or acquaintances.
Direct remittances, which means the total value of money that Nigerians overseas sent to their friends and relatives in Nigeria, have decreased.
Despite an increase in the number of Nigerians moving overseas, direct remittances to Nigeria fell again in the first half of 2023. Over the past three years, Nigeria has seen a lot of this drop.
This reduction indicates that more Nigerians living abroad are sending lesser amounts of money than they once did.
Due to the sudden increase in the number of Nigerians who have relocated to other nations, this is unusual.
According to data from Nigeria’s central bank, direct remittances from 2020 in both the first and second quarters of the previous three years have sharply decreased.
Nigeria recorded the least direct remittance in the first half of the year over the past 9 years in H1 2023 with a value of $951.9 million. Its highest value was $9.9 billion in H1 2019.
Nigeria had the least direct remittance in the second half of a year over the past 8 years in H2 2021, with a value of $866.9 million. The maximum within the period was $9.26 billion in H2 2019. This is similar to the highest value in H1 2019.
What are direct remittances?
The World Bank nicknames direct remittances as ”funds for the folks back home”. Remittances made by migrants to support their families at home, whether money or commodities are called direct remittances. There has been a rapid increase in the value of direct remittances worldwide, majorly in low-income and developing countries, with some countries having 6-10% of their GDP realised from direct remittances.
Remittances can be sums of money sent to settle a bill. However, transferring money to family members is a common aspect of remittances.
According to Investopedia, Remittances are also money paid to another party, typically abroad. Typically, a relative in the recipient’s native country is the sender, and the sender is a foreign worker. Using a bank’s electronic payment system or an electronic money transfer service like Western Union is the most typical way to send money abroad.
Direct remittances in low- and middle-income countries reached a then-record high of $548 billion in 2019, but the Covid-19 pandemic caused them to fall to $508 billion in 2020. It increased again in 2021 to $605 billion and $647 billion in 2022.
How important is direct remittance to the Nigerian economy?
It is undeniable that direct remittances are essential to the Nigerian economy. Nigeria is one of the countries in Africa that receives the most remittances, and a sizable portion of its people live abroad, primarily in Europe, North America, and the Middle East. Nigerians who work overseas send direct remittances home, which are essential to the nation’s economy for a number of reasons.
For Nigeria, remittances are a significant source of foreign exchange profits. These influxes of foreign cash help to keep the country’s exchange rate stable, which is crucial for economies like Nigeria’s which rely heavily on imports.
In Nigeria, remittances have a direct impact on the income and spending of households. Many families rely on these payments to pay for necessities like food, housing, healthcare, and education, which helps to reduce poverty.
The expansion of Nigeria’s banking sector has also been aided by the influx of remittances. Remittance beneficiaries’ use of official banking channels promotes the growth of the financial services industry and its infrastructure.
Why is direct remittance decreasing in Nigeria?
Direct remittance may decrease due to tighter rules, higher costs, or currency control measures discouraging people from sending money through official channels. The simplicity and cost of sending money across borders may change due to modifications to remittance laws or policies in Nigeria and the host nation.
Another factor that could be responsible for the drop in direct remittances is shifting migration patterns such as changes in the destination nations of the remittances or emigration rates.
Another aspect contributing to the decline in direct remittances is the rise in global inflation. Remittance flows can be impacted by the economic climate in both the sending and receiving nations. If the host nation’s economy struggles, there may be fewer work prospects or wage reductions, inflation, currency fluctuations, or diminished earning opportunities.
Informal remittances may be more common in some areas because of trust, practicality, cultural considerations, informal channels or other person-to-person networks. By underreporting remittance inflows through official channels as a result of the usage of informal channels, direct remittance estimates may appear to be declining.
The true size of remittances, which includes formal and informal flows, is believed to be larger than officially reported data.
Recipient countries’ overall economic growth and development may be negatively impacted by a decline in direct remittances, which can also have a significant impact on household financial stability, financial system stability, and household economic well-being.
To lessen their reliance on remittances and alleviate the negative consequences of changes in these inflows, governments and policymakers may need to implement initiatives to diversify Nigeria’s economy, attract investments, and build viable domestic sectors.