Following a year of increased remittance flow in sub-Saharan Africa, the World Bank anticipates further growth this year. Nevertheless, challenges and issues requiring attention accompany this projection.
In its latest Migration and Development Brief titled Remittances Brave Global Headwinds with a Special Focus on Climate Migration, the World Bank projects a 2.5% growth in remittance flows to Nigeria, Ghana, and other sub-Saharan African countries this year. Remittance flows to the region are anticipated to have risen by approximately 1.9% in 2023, reaching $54 billion. Notably, remitting $200 to sub-Saharan Africa incurred an average cost of 7.9% in the second quarter.
Nigeria, as the largest remittance recipient in the region, is expected to receive over $20 billion in official remittances by the end of 2023, marking a slight increase compared to the previous year. Remittances to Nigeria, constituting 38% of the region’s total, grew by about 2%, while Ghana experienced estimated gains of 5.6%. The growth trend extended to other nations, including Mozambique (48.5%), Rwanda (16.8%), Ethiopia (16%), and Kenya (3.8%).
Despite the 3.8% growth in remittances to low- and middle-income countries (LMICs) in 2023, a moderation from previous years, the World Bank expresses concern about the potential decline in real income for migrants due to global inflation and low growth prospects. Remittance flows to LMICs, estimated at $669 billion, have been resilient, supported by stable labor markets in advanced economies and Gulf Cooperation Council (GCC) countries.
However, the World Bank forecasts a further softening in the growth of remittances to LMICs to 3.1%, driven by slowing economic growth and weaker job markets in high-income countries. Additional risks include volatile oil prices, currency exchange rate fluctuations, and the possibility of a deeper-than-expected economic downturn in high-income nations.
Iffath Sharif, Global Director of the Social Protection and Jobs Global Practice at the World Bank, emphasizes in a statement the importance of inclusive labor markets and social protection policies for migrants, whose remittances act as a vital lifeline for developing countries.
“During crises, migrants have weathered risks and shown resilience to support families back home. But high inflation and subdued global growth is affecting how much money they can send,” notes Sharif.
The Remittances Prices Worldwide Database reveals persistently high remittance costs, averaging 6.2% to send $200 in the second quarter. Banks remain the costliest channel for remittances (12.1%), followed by post offices (7%), money transfer operators (5.3%), and mobile operators (4.1%).
Dilip Ratha, lead economist and lead author of the report, advocates leveraging remittances for private capital mobilization to support development finance, particularly through diaspora bonds. Ratha explains that “remittance flows to developing countries have surpassed the sum of foreign direct investment and official development assistance in recent years, and the gap is increasing”.
Nigerian investor Moses Adeolubodun views this development as a positive signal for investment opportunities within the region.
“I believe that this upward trajectory is a testament to the resilience and potential of these economies. The growth further signifies a positive economic outlook, and as an investor, I see promising opportunities for strategic investments,” Adeolubodun tells FORBES AFRICA.
Although acknowledging the challenges highlighted by the World Bank, Adeolubodun remains confident in the long-term potential of sub-Saharan Africa, emphasizing the importance of diversified investment portfolios to navigate economic uncertainties.
“Fostering an environment conducive to remittance growth is essential for sustainable economic development. This is an opportunity for governments and businesses in sub-Saharan Africa to explore innovative solutions that attract foreign investments and support economic growth,” says Adeolubodun.