Remittances to Nigeria, others rebound, surpass FDIs
Remittances to low- and middle-income countries are projected to have grown a strong 7.3 per cent to reach $589 billion in 2021, the World Bank has said.
The Bank noted that this return to growth is more robust than earlier estimates and follows the resilience of flows in 2020 when remittances declined by only 1.7 per cent despite a severe global recession due to COVID-19.
The report, ‘The World Bank’s Migration and Development Brief, said for a second consecutive year, remittance flows to low- and middle-income countries (excluding China) are expected to surpass the sum of foreign direct investment (FDI) and Overseas Development Assistance (ODA).
Remittance inflows to sub-Saharan Africa returned to growth in 2021, increasing by 6.2 per cent to $45 billion. Nigeria, the region’s largest recipient, is experiencing a moderate rebound in remittance flows, in part due to the increasing influence of policies intended to channel inflows through the banking system.
This underscores the importance of remittances in providing a critical lifeline by supporting household spending on essential items such as food, health, and education during periods of economic hardship in migrants’ countries of origin.
In his comments on the report, the World Bank Global Director for Social Protection and Jobs, Michal Rutkowski said: “Remittance flows from migrants have greatly complemented government cash transfer programs to support families suffering economic hardships during the COVID-19 crisis. Facilitating the flow of remittances to provide relief to strained household budgets should be a key component of government policies to support a global recovery from the pandemic.”
Factors contributing to the strong growth in remittance are migrants’ determination to support their families in times of need, aided by economic recovery in Europe and the United States which in turn was supported by the fiscal stimulus and employment support programmes.
Flows increased by 21.6 percent in Latin America and the Caribbean, 9.7 percent in Middle East and North Africa, 8 percent in South Asia, 6.2 percent in Sub-Saharan Africa, and 5.3 percent in Europe and Central Asia.
The cost of sending $200 across international borders continued to be too high, averaging 6.4 percent of the amount transferred in the first quarter of 2021, according to the World Bank’s Remittance Prices Worldwide Database.
This is more than double the Sustainable Development Goal target of three percent by 2030. It is most expensive to send money to sub-Saharan Africa (8 percent) and lowest in South Asia (4.6 percent).
“The immediate impact of the crisis on remittance flows was very deep. The surprising pace of recovery is welcome news. To keep remittances flowing, especially through digital channels, providing access to bank accounts for migrants and remittance service providers remains a key requirement. Policy responses also must continue to be inclusive of migrants especially in the areas of access to vaccines and protection from underpayment,” the lead author of the Brief and head of KNOMAD, Dilip Ratha said.
Remittances are projected to continue to grow by 2.6 percent in 2022 in line with global macroeconomic forecasts.