Sizeable inflows yet destination unknown

Net current transfers compensate in part for the habitual outflow on services and income in Nigeria’s balance-of-payments. In Q2 2018 they reached US$6.36bn, their highest level of the decade. (The figure for Q1 has been adjusted downwards from US$6.43bn to US$6.26bn.) Workers’ remittances account for more than 90% of total transfers. Nigeria’s last year were the fifth largest globally, and the largest in Africa. They represented 5.9% of GDP, which was likely the highest ratio in Africa if we exclude microstates such as The Gambia and the Comoros.

  • Transfers provided US$22.0bn in Nigeria in 2017, compared with US$4.8bn from FDI (gross) and US$8.5bn from FPI (albeit rising through the year due to the CBN’s fx reforms). Remittances cannot, however, be characterised as ‘hot money”.
  • The size of the inflows explains why policymakers seek to include the diaspora into their development plans. They are thwarted by the paucity of data. The recipient institutions (banks and money transfer operators) are not required to ask for any information of the beneficiaries. We have very little idea where the proceeds of remittances are deployed. Armed with this data, the authorities could come up with sectoral policies and incentives.
  • The FGN did, however, raise US$300m from its maiden diaspora bond in 2017, and could repeat the exercise.
Current transfers (net; US$ bn))

Sources: CBN; FBNQuest Capital Research
  • Forecasting remittances is not a scientific exercise. The World Bank’s latest Migration and Development Brief sees a rise of 4.1% in 2018 for low and middle countries in aggregate, following 8.1% last year. The indicators to track are probably incomes per head in the main remitting countries, which in Nigeria’s case are the US, the UK and Gulf states. On the basis of the IMF’s latest growth projections, we should expect decent inflows through to 2019.


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