The World Bank Group has projected that Nigeria will in 2014 receive an inflow of $21 billion as remittances from Nigerians living and working abroad. This figure will place Nigeria as the top receipt of foreign remittance in Africa. Nigeria will be followed by Egypt with a projected remittance of $18 billion.
This fact is contained in a release by the World Bank Group on” Migration and Remittances: Recent Developments and Outlook; Special Topic: Forced Migration “.
According to the report “Remittances to developing countries are projected to grow by 5.0 per cent to reach $435 billion in 2014 accelerating from the 3.4 per cent expansion of 2013, and rise further by 4.4 per cent to $454 billion in 2015. In 2013, remittances were more than three times larger than ODA and, excluding China, significantly exceeded foreign direct investment flows to developing countries. Growth of remittances in 2014 is being led by three regions: East Asia and the Pacific, South Asia, and Latin America and the Caribbean.
“Officially recorded remittance flows to developing countries are projected to reach $435 billion in 2014, 5.0 per cent higher than last year (Figure 1.1 and Table 1.1). The growth in remittances is expected to moderate to 4.4 percent in 2015, raising flows to US$454 billion. This outlook is based largely on lower projected GDP growth rates in key remittance-sending countries. Global remittance flows, including flows to higher-income countries, are expected to follow a similar pattern, rising from US$582 billion in 2014 to US$608 billion in 2015.
“Remittances are an essential source of external funds for developing countries. These flows were three times larger than official development assistance in 2013, and are steadier than both private debt and portfolio equity. Remittance flows are significantly larger than total foreign direct investment to developing countries, excluding China. They are also a more stable component of receipts in the current account, reliably bringing in foreign currency that helps sustain the balance of payments and dampen gyrations
“The global average cost of sending remittances continued its downward trend in the third quarter of 2014, falling to 7.9 percent of the value sent, compared to 8.9 percent a year earlier. Competition and the expansion of mobile-phone and internet-based technologies hold much potential to continue driving down fees. Risk-based approaches to the application of anti-money laundering regulations to remittance operators and international banks hosting their bank accounts will be important to ensuring that compliance does not result in undue costs, which could slow the fall in remittance costs and leave substantial flows underground. The report said “With over 14 million people born in India living abroad in 2013 (estimated to be the largest emigrant stock in the world), India is projected to remain the largest recipient of officially recorded remittance inflows, which may reach $71 billion in 2014. Other countries expected to receive large remittances in 2014 include China $64 billion, the Philippines $28 billion, Mexico $24 billion, Nigeria $21 billion, and Egypt $18 billion”.
The report said that despite the huge sums flowing into large countries, in many instances they are relatively small share of GDP. Giving instances it said remittance flows to India amounted to only 3.7 per cent of GDP in 2013. By contrast, many smaller countries are far more dependent on remittance inflows. For example, remittances as share of GDP amounted to 42 per cent in Tajikistan, 32 per cent in the Kyrgyz Republic, and 29 per cent in Nepal.
It said that the main drivers of remittances are migrant stocks and economic conditions in remittance-sending countries. With the exception of rapid deportations, the stock of migrants is comparatively stable. Still, more needs to be done to reduce the costs of migration, including flows from major oil producing countries track closely with oil prices, as do other factors affecting migrant employment opportunities. For example, oil prices are an important factor in remittance flows from Russia. Climbing migrant employment in the US is boosting remittances to Latin
Exchange rates and the cost of sending remittances are also important determinants. Appreciation of the remittance source country’s currency against that of the recipient country boosts flows (note that changes in the exchange rate between the currency of the remittance source country and the US dollar also affect remittance flows when expressed in US dollars). Similarly, the falling costs and increasing convenience of sending money (discussed in greater detail below) are helping lift remittance flows, especially through formal remittance channels. Conversely, compliance with international anti-money laundering and counter financing of terrorism regulations may be a significant cost factor putting upward pressure on prices, which may in turn leave substantial flows in underground channels (see Box 2.2 further below). In addition, exchange controls in countries such as Argentina and Venezuela are also causing flows to shift underground.
An important feature of remittance flows is how they respond to natural disasters. There is substantial evidence that the humanitarian impulse is a powerful motivator of remittances. For example, the devastating earthquake that struck Haiti in 2010 spurred remittance flows to that country, with further encouragement from money transfer companies committing to transfer remittances free of charge. A similar pattern was observed in Pakistan after the widespread floods in August 2010; remittances jumped 19 percent during the remainder of 2010 compared with the previous year, and 27 percent in 2011. While flooding in Pakistan this year was more limited than in 2010, it still caused massive damage and again may be motivating a rise in remittances; they are projected to rise by 16.6 percent in 2014. Recovery from the super typhoon that struck the Philippines in 2013 brought an 8.5 percent increase in remittances that year, again helped by money transfer companies agreeing to zero fees for making remittances. These observations suggest that remittances are not only a lifeline sustaining consumption in some of the poorest parts of the world, but they also tend to serve as insurance against key risks confronting the poor and help mitigate vulnerability.
With the outlook for GDP growth in major remittance source countries somewhat weaker than previously projected, growth in global remittance flows is also expected to moderate, especially to developing countries in Europe and Central Asia.
The cost average total cost of sending about US$200 fell from 8.9 percent in the third quarter of 2013 to 7.9 percent in the third quarter of this year (Figure 2.1). The average weighted by the size of bilateral remittance flows also fell, from 6.6 percent in the third quarter of 2013 to 5.7 percent in the same period this year. The slight narrowing of the spread between the global average total cost and the global weighted average suggests that even smaller remittance markets are becoming increasingly contested, as mobile operators enter the market and new online services are being offered.
While cash products remain the most widely available, more account-based services are entering the market; cash-to-account remains the lowest-cost method for making remittances among account types. Online services are also expanding, now comprising 23 percent of the sample surveyed by the Remittance Prices Worldwide (RPW) database of the World Bank Payment Systems Development Group. These services offer various ways of paying for a transaction (from bank accounts, bank wires, credit cards, and debit cards), and receiving funds (in beneficiary bank accounts, or in cash through a local agent). The cash-to-account channel averaged 5.4 percent in the third quarter of 2014.
