There is need for President Muhammadu Buhari to initiate a dynamic economic policy to capture Nigerians’ diaspora remittances of $25 billion which exceeds foreign direct investments in 2018. President Buhari should package and treat diaspora remittances as part of our foreign direct investment. For many developing countries, remittances have begun to significantly exceed foreign direct investment (FDI), capital market flows, or official development assistance (ODA). Nigeria’s Foreign Portfolio Investment (FPI) was $4,119.46 billion for the quarter ending June 2018. This compares to Foreign Direct. Moreover, remittances are providing timely support to otherwise shaky balance of payments and fiscal positions. Furthermore, remittances appear to contribute importantly to lifting households out of poverty, as well as benefit the wider community through the multiplier effects of increased spending.
Remittances by Nigerians in the Diaspora rose to a record high in 2018. A report by a global accounting firm showed that Nigerians living abroad remitted a total of $25 billion to their fatherland in 2018.
By that calculation, the 2018 forex inflows from Nigerians in the Diaspora constitute 6.1 per cent of Nigeria’s gross domestic products (GDP) and is seven times the total foreign aid received by Nigeria from donor nations in 2017. Foreign aid to Nigeria in 2017 amounted to $3.359 billion.
Remittances by Nigerians living abroad provided a boost to the economy in 2018 as the total value of remittance from migrants amounted to $25 billion, (about N9 trillion), the highest diaspora inflow into the country in the last 13 years. Nigeria needs a remittances vehicle with in-built effective economic blueprint between remittance flows, investments and SMEs funding. The economic policy should be designed to incorporate remittances-linked financial products such as securitization of well-established remittances flow. This ability to leverage remittances for the SME sector will lead to higher employment and reduced poverty incidence among Nigerian families.
Diaspora remittances finance a significant portion of family budgets in Nigeria, but oftentimes go unrecognized as part of poverty reduction strategy. This is a pointer to a critical need for a joint public-private partnership in the Diaspora Agenda for the benefit of Nigerians. A 2008 report on Migration & Remittances prepared for the International Fund for Agricultural Development (IFAD) found that an increase of 10 per cent of remittances flows contributes to reduction in absolute poverty rate by over 1.5 per cent. For instance, remittances in Guatemala, Bangladesh and Uganda have reduced poverty incidence by 20, 6 and 11 per cent, respectively.
Diaspora bonds can be very useful in the financing of emerging and developing economies. Looking at the success India had with issuing the India Development Bond, Resurgent India Bond and the India Millennium Deposits in balance of payments crises, the patriotic devotion the diaspora has for its country can prove to be very important.
I want to appeal to President Buhari to create more Diaspora bonds which will help to grow Nigeria’s economy. There is therefore the scope for the Federal Government and state governments through community associations or even faith groups in the Diaspora, to make a developmental impact with innovative policies. Annual remittances are running at about $25 billion about three-quarters of total spending in the 2018 budget. There is a stable inflow, unlike portfolio investment or even development assistance.
Nigeria tops remittances to Sub-Saharan Africa with $22bn according to World Bank and it is clear that Nigeria’s Diaspora remittances for 2017 which can fund part of 2019 budget and pay part of Nigeria’s foreign debt for 20 years. Nigeria needs a Diaspora bond of at least half of 2017 remittances to execute capital projects. The revelation is that Diaspora remittances can help shape Nigeria’s debt in the 21st century. Nigeria can create more Diaspora bonds where remittances could be used to fund capital projects in Nigeria. Diaspora fund for one can cover what Nigeria struggles to borrow in 20 years. The interest for servicing foreign debt will now be channelled to Diaspora bond. I want to appeal to President Buhari to create more Diaspora bonds which will help to grow Nigeria’s economy.
Inwalomhe Donald wrote from Abuja and can be reached at:
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