Nigeria’s remittance inflow to hit $26 billion by 2025 as Japa wave continues

Remittances are significant to the economies of low and middle-income countries. Even the United Nations Sustainable Development Goals (SDGs) consider remittances to be a “lifeline for many struggling families and communities in developing countries.”

Therefore, developing countries should witness increased remittances for continued economic growth.

A report commissioned by Agusto and Co. forecasts that remittance inflows into Nigeria will reach $26 billion, surpassing the $20.1 billion that the country amassed in 2021. Two years ago, Nigeria emerged as the second-highest recipient of inflows from the diaspora with $20.1 billion. Only Egypt ($28.3 billion) did better. 

The report noted that while Egypt and Nigeria accounted for more than half of remittances into Africa, the former recorded a 16% increase in inflows. Meanwhile, Nigeria’s growth in remittance slowed by 3% due to a cost of living pandemic that swarmed many developed countries last year. 

Although the above reason affected many developing countries, Nigeria’s case was different because of some domestic policies. It’s worth mentioning that the Central Bank of Nigeria introduced capital controls and counteractive regulations that hindered remittances from legal routes. 

Meanwhile, Nigeria’s remittances represented 38% of Sub-Saharan Africa’s total inflow. Zooming into the region, Tanzania (25%), Rwanda (21.2%), Uganda (17.3%), Ghana (11.9%), and Kenya (8.5%) also had great outings. 

Why Nigeria’s Japa wave is good and bad 

Over the past few years, Nigeria and other African countries have witnessed a mass migration of highly skilled citizens. In search of greener pastures, Nigerians explore scholarship opportunities at universities across the world. While this enables them to experience world-class learning, the trend also negatively impacts the country’s economy. 

Looking at the benefits, a major one is the fact that most of those who travel abroad send money home. This contributes to the country’s volume of remittances, growing the economy. This is highly beneficial for countries with weak economies.

However, the Japa wave dramatically affects the economy, especially the medical and IT segments. It’s common nowadays for medical doctors and software engineers to migrate to countries with better career economies. Their absence means those remaining must cope with the increased workload and the harsh conditions their counterparts fled from.

That’s why Nigerian resident doctors have participated in multiple industrial actions to secure better wages and improved well-being at work. In terms of IT, many commercial banks suffer service downtimes due to a dearth of talented IT personnel. Agusto also identified lower tax revenue as a major consequence of the Japa trend. 

Read also: Nigerians can now receive diaspora remittances in Naira -CBN

The role of mobile devices

The report highlighted that the increased adoption of mobile devices has contributed to Nigeria’s remittance inflows and cross-border payments. Following the pandemic in 2020 and cash scarcity two years after, more Nigerians relied on their phones and other devices to transact. 

To corroborate the above argument, a study found that global mobile phone payments rose by 48% thanks to lockdowns and border closures. In Nigeria, digital banks like Opay, PalmPay, and Kuda capitalized on the situation to expand their customer base.

More on the Agusto report 

As mentioned, Agusto believes Nigeria’s remittance inflows will hit $26 billion by 2025. It further says that the country’s high poverty level will continue to play a significant role in growing remittances. 

There have been mixed reactions after the unification of the exchange rate in June 2023 and other monetary policies.  Agusto strongly believes that operating a single exchange rate will allow Nigeria’s economy to recover. 

“We believe that the unification of exchange rates would also incentivize remittance inflows through official channels, particularly for investment purposes, as it is likely to improve the FX liquidity position, which would facilitate the repatriation of funds,” it mentioned. It also said that as advanced countries’ economies grow, the value of remittances would increase.