Nigeria is a country with many people who have left their homeland for various reasons, such as seeking better education, jobs, security, or freedom in other countries. The United Nations estimates that there were about 1.7 million Nigerians living abroad as of June 2020, but the actual number may be higher as some migrants are not registered or documented. Some of the countries where Nigerians have settled are the United States, the United Kingdom, Canada, South Africa, and other African countries.
One of the ways that Nigerian immigrants contribute to their home country’s economy is by sending money back to their families or communities in Nigeria. These money transfers are called remittances and they are a major source of income, foreign currency, and development funding for many developing countries, especially in Africa. The World Bank reports that remittances to low- and middle-income countries reached $540 billion in 2020, despite the COVID-19 pandemic that affected global migration and economic activity.
Nigeria is the largest recipient of remittances in Africa and one of the largest in the world. The World Bank estimates that Nigeria received $21 billion in remittances in 2020, down from $23.8 billion in 2019. This amount is equivalent to about four percent of Nigeria’s gross domestic product (GDP) and more than the country’s oil revenues. Remittances are mainly sent by Nigerians living in the United States, the United Kingdom, Canada, Italy, Germany, France, Spain, and other European countries.
Remittances have many positive impacts on the Nigerian economy and society. They help to reduce poverty, improve living standards, increase consumption, enhance education, health, and entrepreneurship, support social and political stability, and foster financial inclusion. Remittances also have a multiplier effect as they generate more income and employment opportunities for the recipients and their communities. For example, a study by PricewaterhouseCoopers (PwC) found that every dollar of remittance received by a Nigerian household translates into $2.5 of income for the economy.
Nevertheless remittances are often coupled with challenges and limitations. They are subject to fluctuations due to economic shocks, exchange rate movements, political instability, natural disasters, or health crises in both the sending and receiving countries. They may also create dependency, reduce labor supply or productivity, increase inequality, or fuel inflation or corruption in some cases. Moreover, remittances are often costly to send or receive due to high fees charged by intermediaries such as banks or money transfer operators. According to the World Bank, Sub-Saharan Africa is the most expensive region to send money to, where sending $200 costs an average of 8.2 percent in the fourth quarter of 2020. In Nigeria, the average cost of sending $200 was 9.3 percent in the same period.
There remains a need for more effective policies and regulations to facilitate and leverage remittances for Nigeria’s economic development. Some of the possible measures include reducing transaction costs, improving data collection and analysis, enhancing financial literacy and access, promoting investment opportunities and incentives, strengthening diaspora engagement and networks, and addressing the root causes of migration.