The economic crisis in the UK and US threatens remittances to Nigeria

Remittances to sub-Saharan Africa, of which Nigeria is known to be the largest beneficiary, are threatened by the economic crisis in the UK and US, among others.

In its latest Migration and Development Report, the World Bank had forecast that remittances to sub-Saharan Africa would increase by seven percent this year.

“Uncertainty and risks related to remittances to Africa (2022) are exceptionally high against the backdrop of global conditions affected by the Russian invasion of Ukraine coupled with the ongoing impact of the COVID-19 pandemic,” Dilip said Ratha, head of Global Knowledge Partnership on Migration and Development, said in an email response to questions.

Migrants in receiving countries are experiencing deteriorating external conditions such as a looming recession with inflation at 9.4 and 8.5 for the UK and US respectively, rising prices for goods and services, tightening monetary policies, supply chain bottlenecks the Russia-Ukraine war combined with the ongoing impact of the COVID-19 pandemic.

A UK-based Nigerian, who identified himself simply as Makua, said inflation and the high cost-of-living crisis were rocking the UK right now. “You can only give what little you have,” he said.

Rotimi Johnson, a UK-based father of three, told BusinessDay: “People need the money more here; If you were making £5,000 before and were able to keep £2,000 but can barely save £1,000 now because everything is expensive because of inflation, you won’t be able to send as much as you used to.

“You have to take care of yourself first before you go home.”

Remittance inflows to Sub-Saharan Africa and Nigeria reached US$49 billion and US$19.2 billion in Nigeria in 2021 and would increase on a projected 7 percent increase to US$51 billion and US$21 billion respectively , according to the World Bank.

According to the report, strong gains in 2021 were the highest since COVID-19 and remittance growth was supported by strong economic activity in Europe and the US, and in part by measures aimed at attracting inflows through Nigeria’s banking system , leading to its 11.2 percent increase over 2020.

Ratha said that despite the external factors causing the uncertainty, the inflow of remittances is due to reasons such as strong performance in the labor markets in the US and UK, the largest receiving countries, and increasing use of official channels for remittance inflows to Nigeria should do well regulatory change.

“Although economic activity is slowing in the United States and Europe as pandemic-related fiscal programs expire, inflation rises and financial conditions tighten, fundamental market conditions (particularly for employment) are expected to remain fairly stable,” Rahma said.

The Bureau of Labor Statistics reported that the US unemployment rate hit 3.5 percent in July, down from pre-Covid levels.

The UK recorded an unemployment rate of 3.7 percent in June, which is 0.2 percentage points below pre-coronavirus levels, the Office of National Statistics reports. Latest data released this week shows that unemployment has risen to 3.8 percent.

Also read: Like Nigeria, the British rental market is also slipping into crisis

During the peak of COVID-19 in the US, employment levels among foreign-born workers fell 21 percent in April 2020 compared to February 2020, but have steadily recovered thereafter.

The recovery in employment levels, along with cash remittances received directly from the government, allowed migrants to remit money to family and friends in their countries of origin.

In Nigeria, policies such as the “Naira 4 Dollar Scheme” introduced by the Central Bank of Nigeria on March 8, 2021 are encouraging the influx of Nigerians in the diaspora as recipients receive 5 N5 for every US$1 received by remittance. It also allows recipients to receive this reward whether they choose to collect the USD in cash, at a bank counter, or transfer it to a domiciliary account.

“Increased use of official channels for inflows into Nigeria amid regulatory changes should sustain upward trends in recorded inflows – this has already been observed for remittance inflows into Nigeria for the last quarter of 2021 and the first quarter of 2022 with increases of 23%. and 20 percent (year-over-year), Ratha added.

According to him, despite the uncertainties in the host country, as demonstrated in 2020, migrants tend to take into account the economic events in the countries of origin, particularly higher food prices and food insecurity in Africa.

“As demonstrated during the peak of the COVID-19 pandemic, existing overseas workers are likely to continue sending money to help families in home countries who are now experiencing price hikes on food and other necessities,” he said.

Other factors believed to be influencing continued inflows are the revival of intra-regional remittance flows from the large stock of migrants from the rest of Africa residing in countries that will benefit from improved trading conditions.

“The doubling of global crude oil prices and the rise of several metals serve to improve tax revenues and – likely – growth for countries like Nigeria,” the report said.

Remittance inflows have proven robust, the global financial crisis and the Covid-19 crisis showed that even during a crisis in the host country, migrants could try to reduce consumption (or rent payments) and draw on their savings to keep sending money home.

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