Remittances to Nigeria and other Sub-Saharan African countries are likely to drop by 9 per cent to $44billion in 2020 due to the effects of the coronavirus (COVID-19) pandemic, the World Bank has said.
The Bank, which made this prediction in its latest, “Migration and Development Brief,” also projected that as the pandemic and economic crisis continues to spread, the amount of money migrant workers send home is expected to decline globally by 14 percent by 2021 compared to the pre COVID-19 levels in 2019.
Specifically, the World Bank stated: “Remittances to Sub-Saharan Africa are expected to decline by around 9 percent in 2020 to $44 billion. Within the region, remittances to Kenya have so far stayed positive, though flows are likely to eventually decline in 2021. All major remittance-receiving countries will likely see a decline of remittances.
“As the COVID-19 pandemic affects both destination and origin countries of Sub-Saharan migrants, the fall in remittances is expected to further lead to an increase in food insecurity and poverty. Remittance costs: Sending $200 remittances to the region cost on average 8.5 percent in the third quarter of 2020, representing a modest decrease compared with 9 percent a year ago. Sub-Saharan Africa is the costliest region to send remittances to. The promotion of digital technology, combined with a regulatory environment promoting competition in the remittances market and review of AML/CFT regulations, are essential to lowering remittances fees for the region.”
In addition, the Bretton Woods Institution stated that remittance flows to Low and Middle-Income Countries (LMICs) are projected to fall by 7 percent, to $508 billion in 2020, followed by a further decline of 7.5 percent, to $470 billion in 2021.
According to the World Bank: “The foremost factors driving the decline in remittances include weak economic growth and employment levels in migrant-hosting countries, weak oil prices; and depreciation of the currencies of remittance-source countries against the US dollar.”
The Multilateral Development Bank said the declines in remittances in 2020 and 2021 will affect all regions, with the steepest drop expected in Europe and Central Asia (by 16 percent and 8 percent, respectively), followed by East Asia and the Pacific (11 percent and 4 percent), the Middle East and North Africa (8 percent and 8 percent), Sub-Saharan Africa (9 percent and 6 percent), South Asia (4 percent and 11 percent), and Latin America and the Caribbean (0.2 percent and 8 percent).
However, even with the expected decline, the World Bank stated that the significance of remittances as a source of external financing for LMICs is expected to increase in 2020, noting that: “Remittance flows to LMICs touched a record high of $548 billion in 2019, larger than foreign direct investment flows ($534 billion) and overseas development assistance (about $166 billion).
“The gap between remittance flows and FDI is expected to widen further as FDI is expected to decline more sharply,” it added.
Commenting on the report, lead author of the Brief and head of KNOMAD, Dilip Ratha, said: “Migrants are suffering greater health risks and unemployment during this crisis. The underlying fundamentals driving remittances are weak and this is not the time to take our eyes off the downside risks to the remittance lifelines.”
Similarly, Vice President for Human Development and Chair of the Migration Steering Group of the World Bank, Mamta Murthi, said: “The impact of COVID-19 is pervasive when viewed through a migration lens as it affects migrants and their families who rely on remittances. The World Bank will continue working with partners and countries to keep the remittance lifeline flowing, and to help sustain human capital development.”