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Nigeria’s $22.3 Billion Migrant Remittance: The Real Economics

Nigeria’s $22.3 Billion Migrant Remittance: The Real Economics

Does a growing migrant remittance inflow provide any insights on the economic and development state of recipient nations like Nigeria? To what extent does the state of the recipient nation stimulate remittance growth for a given period?

For decades, economists have used diverse metrics for measuring wealth creation, human development and economic growth for nations. Values like Gross Domestic Product (GDP) have been used for years but it has also come under serious scrutiny, as experts query its present-day usefulness and relevance. Globalization, technological growth and changes in lifestyle have now provided nations several new – albeit more efficient – measures of economic performance and state of development.

In 2017, the money transfer industry was excited about the growth of remittances to Sub-Saharan Africa, which peaked at $37.8 billion, led by Nigeria with $22.3 billion, according to the World Bank. While this is hailed as great news for Fintech and albeit the Nigerian economy at large; the conversation on the economic impacts of remittances (both financial & social remittances), is very double edged! In spite of the apparent economic benefits, high ranking recipient nations like Nigeria have many reasons to worry. This is because the seemingly good growth in migrant remittances is underlied by the equivalent growth in mass emigration that highlights a bigger problem.

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I postulate that migrant remittances may be the new GDP in a distinct shape; a quasi-measure of economic growth and even development within a country.  If you don’t agree; compare the GROWTH in migrant remittance inflows from the year 2000  to 2017 in Nigeria (1,500%), to that of four random countries; United States (50%), Japan (253%), and South Africa (122%).

Furthermore, with Nigeria (190 million people) recording $22.3 billion worth of inflows in 2017 – one of the highest in the word – which other countries have huge numbers in absolute figure and how does their economy compare? Philippines with 103.3 million people (remittance = $32,795 billion), Pakistan with 193m people (remittance = $19,801 billion) Mexico with 127.5 million people (remittance = $30,534 billion).

Undoubtedly, migrant remittances stimulate local demand for goods and service, and often stand as a viable source of foreign exchange. However, if growing financial remittance over these years correlates with increased migration, and also doubles as a pointer to the steepness of the economic divide (income levels, social welfare and standard of living) between the receiver nation and the source nation(s), then large remittances may be a Trojan horse for recipient nations. This scenario shifts the strategic question for nations like Nigeria. It highlights the need for radical improvements in the standard of living, which would cob emigration, as opposed to the superficial concern of lowering absolute cost of remittance in order to increase, the volume. While savoring the many benefits of diaspora financial remittances made possible by emergent payment technologies, it’s also important to note that its continuing growth could be indicative of worsening economic conditions.

What of “Social Remittance”?

As the remittance blessing/anomaly is adjusted, there is also an exigent need to balance high financial remittance with equivalent volume of “Social Remittance”. As a top beneficiary of financial remittances, Nigeria should also champion Migrant Social Remittances, which is the reverse flow of ideas, skills, values and knowledge from migrants to their home country.

The Nigerian Ministry of Foreign Affairs recently launched a great initiative to support Nigerian Diasporas looking to contribute to the home economy. Broadly, that initiative resembles a channel for some degree of social remittances.  How sufficient could it be? It may be analogous to using a single Fintech platform for the $22. 3 billion remitted to Nigeria in 2017. I well believe that the potential social remittances to Nigeria, if quantified will be equivalent to or higher than the financial remittance of $22.3 billion and there should be market-driven solution for capturing that value.  As we strive to capture currently forgone social remittances, the pertinent question remains; why does Nigeria have one of the highest levels of migrant remittance in the world? And why has it been on the rise since the last 18 years.

A poverty Link? Yes!

 Wide spread, systemic poverty traps! The economic and development concept of poverty traps describes people who can neither “raise” (earn or save) sufficient capital to liberate themselves, nor ‘find” capital (through borrowing or aid) to support self-growth. They are therefore lost in a vicious, endless cycle of insufficiency. There are studies supporting the postulation that remittances rarely support meaningful investments in receiving countries, as they are typically geared toward consumption. One World Bank report supported the notion that remittances are counter cyclical (compared to foreign Aids and FDI), since they grow in times of economic downturn and natural disaster (and relatedly decline in times of boom in home countries). This is a pointer to the relationship between poverty, emigration and remittances and why Nigerian has been on a continuous growth trajectory for 18 years.

In Nigeria the Uperclass-middleclass-lower class social classification is appearing unsuitable for depicting the nation’s economic strata.  Rather we might have The Rich; The Poor and the “Trapped Poor”. Nigeria’s “trapped poor” are the hundreds of millions of people who are poor in Human Capital, Financial Capital, Infrastructure Capital and Knowledge Capital and whose chances of overcoming those barriers are extremely low. There have been some direct attempts at alleviating poverty in Nigeria, some of which were misguided and ill-designed. But the great tragedy is the politicians’ misconception that traditional efforts will be sufficient in rescuing the trapped poor. Since that misconception has consistently failed, the outcome has been mass emigration. The sheer inefficiency or insufficiency of decades of economic interventions in Nigeria – that breeds citizen frustration, emigration- and eventually remittance – will continue to instigate wide spread impoverishment.

Therefore, the hard questions for Nigeria amidst her booming remittance market are many. How can growing remittances help to inspire development at home and in turn, cub the emigration that feeds it? Also, how will the lost benefits of “Social Remittance” be properly harnessed?

From the impoverishment and frustration that inspires emigration, to the eventual remittances of foreign income to the home country and the ensuing argument on their costs/benefits; it appears Nigeria is entangled in a complex economic-development phenomenon that calls for a serious but presently absent debate.

Chijioke MAMA is the Founder of Meiracopp Nigeria Limited (MNL) and a Doctoral Researcher at the University of Port Harcourt ([email protected])

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