Low remittances: Household budgets of Nigerian diaspora under pressure —Report

THE slump in net current transfers in Nigeria’s balance of payments (BoP), has shown that the household budgets of the huge Nigerian diaspora have come under enormous pressure.

Analysts from FBNQuest who made this observation last week, noted that the national lockdowns in most advanced economies may have been a marginal factor although most remitting parties surely transact online rather than walking down to the local branch of Western Union.

From the Central Bank of Nigeria’s (CBN) latest Quarterly Statistical Bulletin the net current transfers in the balance of payments (BoP) slumped by 32.1 per cent year on year  (y/y) to $3.9 billion in second quarter (Q2) 2020, and by 36.4 per cent quarter on quarter (q/q).

It further showed that the comparable figures for net workers’ remittances, which comprise about 85 per cent of net transfers, were 42.2 per cent and 40.1 per cent.

In mid-April the World Bank suggested that the decline for emerging and frontier states due to the virus could be around 20 per cent on an annual basis: in Kenya remittances have held up well, and in Pakistan and Bangladesh they have increased.

“Net current transfers in Nigeria in Q2 2020 were the lowest for at least 12 years. In the last domestic recession that spanned for five quarters from Q1 2016, the decline was modest because the remitting countries were still growing,” the analysts observed.

This time the recession is near-universal. The five countries that are the largest sources of remittances to Nigeria (US, UK, Germany, Italy and Canada) are forecast to contract by between -4 per cent (US) and -11per cent (Canada), this year, according to the IMF’s latest World Economic Outlook, released last week.

“Their sharp fall in the quarter notwithstanding, net transfers in Q2 2020 were still far more important in financing terms in the BoP than net foreign portfolio investment (FPI; outflow of $80 million) or net FDI ($520 million). Other than the occasional surge in FPI such as Q1 2019, this has been the case for many years,” the FBNQuest analysts stated.

 

 

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