CRUDE oil has for decades been the mainstay of Nigeria’s economy. That is what the majority of Nigerians know. But only a few people are aware that Nigeria earns more dollars from diaspora remittances than it earns from crude oil sales. However, signals from the remittances market are no longer looking fabulous.
World Bank has predicted that the huge dollar inflows from Nigerians living abroad will drop by 20 per cent this year as senders face income crunch due to the Coronavirus pandemic.
The Nigeria National Petroleum Corporation (NNPC) inflow in 2019 was about $15 billion while migrant remittances stood at $25 billion, adding to the country’s Gross Domestic Product (GDP).
However, the World Bank’s prediction means there was a need to attract more remittances in the economy by increasing the channels through which the funds come in.
World Bank Group President David Malpass said remittances are a vital source of income for developing countries. The ongoing economic recession caused by COVID-19 is taking a severe toll on the ability to send money home and makes it all the more vital that we shorten the time to recovery for advanced economies. He explained that remittances help families afford food, healthcare, and basic needs.
Malpass estimates that remittances to low and middle-income countries would recover and rise by 5.6 per cent to $470 billion. He said the global average cost of sending $200 remains high at 6.8 per cent in the first quarter of 2020, only slightly below the previous year. Sub-Saharan Africa continued to have the highest average cost, at about nine per cent, yet intra-regional migrants in Sub-Saharan Africa comprise over two-thirds of all international migration from the region
Analysts said financial sector regulators could amend Bureau De Change (BDC) operators’ operational modalities to include receiving remittances.
Association of Bureaux De Change Operators of Nigeria (ABCON) President Aminu Gwadabe said diaspora remittances remain the backbone of Nigeria’s foreign exchange inflows and should be protected. He said protecting the remittances market will require policy shift including breaking the current monopoly that limits funds receipts to only ‘few lucky’ players at the detriment of the economy.
For him, now is the time to break the monopoly, which puts the remittances market in the hands of few players and deprives others from tapping into the goldmine. For him, there is an urgent need to get more players to join the remittance collection market including getting BDC operators approved for the business.
He said Bureaux De Change (BDCs) one of the channels through which Diaspora remittances enter the economy will give depth to the forex market and boost BDCs operations.
He insisted that for Nigeria to get the full value of what is due to her in the remittance market, BDCs have to be included in the remittances payment channels and allowed to receive funds from Nigerians in Diaspora. The BDCs are to perform this role through contactless and digitised channels to make collections easy and seamless.
“Now is the time for government and financial sector regulators to promote contactless payment channels, leveraging digitisation in the receipt of migrant remittances. The first win will be getting BDCs included in the payment channels to break monopolies of the fewer players, use of Simple Virtual Know Your Customer rule for beneficiaries and implementing supportive regulations,” Gwadabe said.
The ABCON boss also called for the establishment of training institutes to enhance capacity and infrastructure in the industry and broadening players’ business scope with cash-back incentives for those that patronize BDCs while also implementing less cumbersome and complex documentation requirements for end-users.
Gwadabe said the entry of BDCs into the remittance market will reduce such high cost of receiving money and deepen the job market.
Besides, 90 per cent of the total World Bank estimate of about $18 billion is trading outside the official window while a majority of the registered International Money Transfer Operators (IMTOs) patronise the informal market because of the higher margin and post-funding settlements method of the unlicensed agents.
Credit: The Nation
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