Nigeria accounted for the highest remittance flow into Sub-Saharan Africa in 2022, as the continent recorded an estimated $52.9 billion, the latest World Bank report has stated.
The report, tagged, ‘Remittances Remain Resilient But Are Slowing’, covered 2022, and showed that Nigeria accounted for $20.1 billion.
This represents 38 per cent of the total remittance flow and is higher than that of Ghana (11.9 percent), Kenya (8.5 per cent), Tanzania (25 percent), Uganda (17.3 percent) and Rwanda (21.2 per cent).
“The increase in remittance flows to the region supported the current accounts of several African countries dealing with food insecurity, supply chain disruptions, severe drought (Horn of Africa), floods (in Nigeria, Chad, Niger, Burkina Faso, Mali, and Cameroon), and debt-servicing difficulties,” the report said.
A broader look showed that remittance flows to low-and middle-income countries (LMICs) was $647 billion, but it was projected to rise slowly by 1.4 per cent to $656 billion in 2023.
For the total remittance flows globally, the projection is $840 billion in 2023 and is projected to increase further by $18 billion in 2024.
Commenting on the importance of remittance flows, the World Bank said: “Over the past year, remittances have continued to represent an even larger source of external finance for LMICs, relative to foreign direct investment (FDI), official development assistance (ODA), and portfolio investment flows.
“The importance of remittances as a premier source of external finance for LMICs is more apparent when China is excluded from the sample.”
The report further stated that: “Remittances have become the most important foreign exchange earner in several countries. For example, for Kenya remittances are larger than the country’s key exports, including tourism, tea, coffee, and horticulture. Those countries more dependent on receipts as a proportion to GDP include the Gambia, Lesotho, Comoros, and Cabo Verde.”
In addition, the World Bank said Sub-Saharan Africa remains the region with the highest remittance costs. Highlighting how costly remittance is on the continent, the report said: “Senders had to pay an average of 8.0 percent to send $200 to African countries during 2022Q4, compared with 7.8 percent in 2021Q4. Costs vary substantially across the region, ranging from 2.1–4.0 percent in the lowest cost corridors to 17–35 percent in the highest.
“For example, sending $200 in remittances from Tanzania to neighboring Uganda would have cost a migrant 35.5 percent in 2022Q4. Banks charge the highest costs, thus emphasising the importance of cross-border mobile money transactions. In Kenya, Rwanda, Tanzania, and Uganda, such transactions are constrained by limited interoperability among telecom operators and money transfer operators.”
Meanwhile, the growth of remittance flow into Africa is projected to fall to 1.3 per cent in 2023, from 6.1 per cent in 2022.
“Risks to the outlook include capital outflows, measures to control foreign exchange, and sanctions. South Africa was put on a “gray list” by the Financial Action Task Force (FATF). Growth in remittance flows is expected to recover to 3.7 percent in 2024,” the World Bank said.