Nigeria, Africa’s leading economy and an emerging country with huge potential, has an ever-growing, highly educated and entrepreneurial population. The Nigerian diaspora is spread all over the world – from the United States to the UK, South Africa to the UAE and can even be found in European nations such as Italy and Spain. As per industry reports, Nigerians in the US are amongst the most educated and entrepreneurial migratory groups, with their median household income standing at US$62,351, compared to the national average of US$57,617 as of 2015.
But how does this make Nigeria the number one African country for remittances? The answer is in the commitment and duty that Nigerian expats exhibit by regularly remitting for the well-being of their family. Such is the inflow of capital into the country that World Bank reports revealed Nigeria’s remittance flows stood at US$ 25.08 billion and accounted for 5.74% of its GDP in 2018.
Also Read: How Money Transfer Fuels African Economies
The growth of remittances to Nigeria
Not surprisingly remittances to Nigeria have cemented the country’s position among the top five recipient nations globally, preceded only by India, China, Philippines and Mexico, in that order.
Let’s look at some numbers that demonstrate the role that remittances play in the Nigerian economy. The growth of remittances to Nigeria in 2018 represented a 14% uptick from the preceding year. It amounted to 83% of the Federal Government’s budget for the year and over 10 times the FDI inflow. Over the last six years, over 17 million Nigerian expats have made international money transfers to Nigeria to the tune of US$96.5 billion, representing a surge of over 126%. A significant chunk of remittances to Nigeria come in from the United States, Switzerland, UAE, Cameroon, Russia and China, among others. The USA is the single most significant contributor of money transfers to Nigeria accounting for about 30% of all remittances, along with Europe and Cameroon as the other notable contributors.
A study conducted to understand how this money is used revealed that when expats send money to Nigeria, 70% of the funds are used for consumption purposes. In contrast, the balance 30% is usually invested, further fuelling the economy. This trend is only expected to grow in the near future. Moreover, according to a PwC report, the growth of remittances to Nigeria is expected to increase to US$29.8 billion and US$34.8 billion in 2021 and by 2023, respectively.
Factors contributing to an increase in money transfers to Nigeria
It may be concluded that the rise in remittances to Nigeria is partly due to global economic growth, especially in the high-income OECD countries, as well as the increase in oil prices since July 2017 which has boosted economic activities in oil-producing countries. Both OECD and oil-producing countries host Nigerian expats who send money home to family and friends, and this may be pivotal in the remittance flows to Nigeria.
Acknowledging the massive contributions by emigrated Nigerians to the economy, the country established Nigerians in Diaspora Commission (NiDCOM) that aims to leverage human capital and material resources of the Nigerian diaspora to execute a strategy that contributes to the socio-economic development of Nigeria.
Nigeria has consciously adopted measures to attract remittance inflows that will contribute to economic development. For example, floating a US $300 million Nigerian diaspora bond and introducing a Certificate of Capital Importation (CCI) are a few steps in that direction. The CCI, issued by Nigerian banks, confirms an inflow of foreign currency in cash or goods and facilitates straight-through processing. Nigeria has also become a member of the International Association of Money Transfer Networks.
Cutting costs and enabling smooth transfers
Despite the rise in international money transfers to Nigeria and Africa in general, the average cost for money transfers to sub-Saharan Africa remains the highest in the world. While the global average cost of remittances is 6.82% as of Q4 2019, the cost to send money to Africa is quite high at approximately 8.96%, according to the World Bank. This cost not only impacts the lives of the expats and their families but also affects Africa’s economy in general. According to industry reports, it is estimated that excess fees charged for remittances to Africa cost the continent a whopping US $1.8 billion last year.
A secure and cost-effective money transfer facility is the need of the hour for the ever-growing Nigerian diaspora. To this end, global money transfer organisation Xpress Money provides customers fast, efficient and secure money transfer to Nigeria at competitive prices.
Over the years, Xpress Money has continued to strengthen its services in the African market by building accessible, affordable and convenient channels for international money transfers. We have developed partnerships with trusted organisations to facilitate mobile wallet services not only across Nigeria but in countries like Kenya, Uganda, Tanzania, Ghana, The Democratic Republic of Congo, Burundi and Cameroon.
As migration trends gain momentum, more people continue to make international money transfers to Nigeria, and in more significant amounts. It will become increasingly important to use the most competitive and secure transfer methods. Xpress Money is committed to offering competitive costs and helping to meet this growing demand.
