The World Bank reports that Nigeria received $19.5 billion in diaspora remittances in 2023.
The report highlights the substantial economic contributions from Nigerians abroad while acknowledging the Central Bank of Nigeria (CBN) recent effort to address the persistent challenges within the foreign exchange (FX) market.
Earlier this year, a tax committee report emphasized a critical issue: over 90% of Nigeria’s diaspora remittances, totaling $19.5 billion, bypassed the formal FX market. This diversion has exacerbated liquidity issues in Nigeria’s FX market. The World Bank’s analysis noted high remittance costs in Sub-Saharan Africa, averaging 7.9%, complicating matters.
Despite a slight decrease in remittances, Nigeria accounted for about 35% of the region’s total diaspora inflows in 2023. Significant growth was reported in remittances to other Sub-Saharan countries, such as Uganda (up 15% to $1.4 billion), Rwanda (up 9.3% to $0.5 billion), Kenya (up 2.6% to $4.2 billion), and Tanzania (up 4% to $0.7 billion). Nigeria saw a 2.9% decline in remittances to $19.5 billion. Other major recipients included Ghana with $4.6 billion and Kenya with $4.2 billion, while Sudan and South Africa each received $1 billion.
The report underscored the pivotal role of diaspora remittances in Sub-Saharan economic development, constituting a significant portion of GDP for countries like Gambia, Lesotho, Comoros, Liberia, and Cabo Verde. However, these inflows are overshadowed by larger diaspora contributions to countries like India, which received approximately $119 billion during the same period.
Key remittance sources were identified as the United States, Canada, the United Kingdom, Switzerland, and Italy, with associated costs highlighted, including bank charges and transfer fees.
Taiwo Oyedele, Chairman of the Presidential Fiscal Policy and Tax Reforms Committee, addressed challenges in Nigeria’s FX market absorption of remittances, noting widespread use of digital apps and parallel market rates by Nigerians abroad.
In response, the CBN has implemented measures to enhance official FX market inflows, including a committee led by Governor Olayemi Cardoso. These efforts, supported by the World Bank, aim to unify exchange market windows and introduce new operational models for financial institutions and money transfer operators.
Despite these efforts, the formal FX market’s capacity to fully absorb remittances remains a significant concern, impacting liquidity and currency stability. However, ongoing CBN initiatives are expected to integrate remittances into the official system, potentially surpassing crude oil exports as a major foreign currency source in the future.