Africans in the West who are making a lot of money are increasingly eager to share that money with the countries they came from. In recent years, remittances are going back to their home countries in large volumes, as figures from the World Bank show.
Africans sent $46 billion to their home countries in sub-Saharan Africa in 2018, a 10 per cent jump in remittances on the previous year, according to the World Bank’s latest Migration and Development Brief. The growth in remittances to the region was supported by strong economic conditions in high-income economies, the World Bank said.
As a country with the largest population and economy, Nigeria topped recipients in sub-Saharan Africa with more than $24.3 billion in official remittances in 2018. This is an increase of more than $2 billion compared with the previous year figure of $22.3 billion.
Remittances to Sub-Saharan African countries in 2018 contributed significantly to the Gross Domestic Product (GDP) of these nations.
Looking at remittances as a share of gross domestic product, Comoros had the largest share, followed by the Gambia, Lesotho, Cape Verde, Liberia, Zimbabwe, Senegal, Togo, Ghana, and Nigeria, according to the Brief.
Remittances to the Middle East and North Africa grew 9 per cent to $62 billion in 2018. The growth was driven by Egypt’s rapid remittance growth of around 17 per cent.
“Beyond 2018, the growth of remittances to the region is expected to continue, albeit at a slower pace of around 3
Remittances to low- and middle-income countries also reached a record high in 2018. The bank estimates that officially recorded annual remittance flows to low- and middle-income countries reached $529 billion in 2018, an increase of 9.6 per cent over the previous record high of $483 billion in 2017.
Global remittances, which include flows to high-income countries, reached $689 billion in 2018, up from $633 billion in 2017.
Remittances have become one of the most important external sources of finance for Africa over the years. Recent surveys state that most of the money migrant workers send home to sub-Saharan Africa is spent on education, health care, land, building houses, starting a business or improving farms
One of the huge benefits of remittances is that, unlike development aid, they flow directly into the pockets of the intended person, experts say
Research by Adams Bodomo of the University of Vienna argues that Diaspora remittance funds constitute a better alternative to Overseas Development Assistance (ODA) funds for the development of Africa for a number of reasons.
“The funds are less likely to be misspent as compared to the misappropriations and legendary inefficiencies in the foreign aid industry. Diaspora remittance funds, as gifts of love, are better focused on building the family and hence the nation.
“The distribution of these Diaspora remittance funds is far more efficient than ODA funds since these monies go directly to paying school fees, building houses, and growing businesses,” he wrote.
As remittances make up a significant share of gross domestic product in African countries, they help boost the economies of the respective countries.
However, the cost of sending money to Africa remains high as compared to other regions in the world. Remittance fees tend to consume a lot of cash that could have been used by the receiving families
The cost of sending money to Africa remained at a high 10 per cent, while the global average cost of sending US$200 was around seven per cent in the first quarter of 2019, according to the World Bank’s Remittance Prices Worldwide database
Reducing remittance costs to three per cent by 2030 globally is one target of the Sustainable Development Goals (SDGs). Banks were the most expensive for sending money abroad, charging an average fee of 11 per cent in the first quarter of 2019, said the Brief
It explained that banks’ ongoing de-risking practices, which have involved the closure of the bank accounts of some remittance service providers, are driving up remittance costs.
Post offices were the next most expensive, at over 7 per cent as remittance fees tend to include a premium where national post offices have an exclusive partnership with a money transfer operator.
This premium was on average 1.5 per cent worldwide and as high as 4 per cent in some countries in the last quarter of 2018.
On measures to lower remittance costs, Dilip Ratha, lead author of the Brief said, “Remittances are on track to become the largest source of external financing in developing countries.
“The high costs of money transfers reduce the benefits of migration. Renegotiating exclusive partnerships and letting new players operate through national post offices, banks, and telecommunications companies will increase competition and lower remittance prices.”
The Brief also touched on the SDG target of reducing the recruitment costs paid by migrant workers, which are high, especially for lower-skilled migrants.
“Millions of low-skilled migrant workers are vulnerable to recruitment malpractices, including exorbitant recruitment costs,” said Michal Rutkowski, Senior Director of the Social Protection and Jobs Global Practice at the World Bank.
“We need to boost efforts to create jobs in developing countries and to monitor and reduce recruitment costs paid by these Africans.”