Another Look At Remittance

The Nigerian Telecom Sector Can Breathe Again

Migrants leave home to escape. Across the world, more and more people are willing to move. For many, migration is an escape from poverty and other political or religious persecution. But the goal is the same, to seek and find a place of rest; to be able to live free.

Warsan Shire in the poem Home, aptly captures the feeling of migrants when they leave home. “no one leaves home unless home is the mouth of a shark”. When migrants leave home, they are running from the mouth of a shark. They are seeking refuge.

Many times, even though they have left home, home doesn’t leave them. They think of home, they talk to those still behind and maintain the connection. Then they look for how to make life bearable for those left behind at home. They seek the earliest option to begin to send money home.

First in bits for upkeep. Initially, they seek to address small everyday issues and gradually move to more pressing issues offset house rents, pay school fees, finance a small business, and build a house. As time goes, the list grows and the amount grows.

Remittance is born.

There are a million and one stories around and about remittance. Many good, some great and a few bad.

In Africa, the reason people leave home is not usually far-fetched. The continent is perhaps easily the most misgoverned capital of the world. Thieving leadership breeds poor countries, zero infrastructure, lack of jobs and political persecution. It also breeds people eager to leave and try their fortune elsewhere.

Escape via migration becomes the only options open to many, especially those who can’t get or are unwilling to secure a foothold in the corruption laden governments. It becomes necessary to escape from the mouth of a shark.

No, Africa is not the migration capital of the world. There are 25 million African migrants across the world. This is a little less than 10 percent of the total migrant figure of over 258 million.

The African Report indicates that the continent received over $82bn in personal remittances in 2019 alone. This figure is almost double the amount to foreign direct investment (FDI) flows of the same period $46bn.

Remittance has thus emerged as the largest source of incoming capital.

Take Nigeria. The country received an estimated $24bn in personal remittances in 2019 compared to about $3bn in FDI. Indeed, among, what is termed, the major African economies, only South Africa received more FDI than personal remittances.

There are reports that remittance in 2020 will not reach the 2019 level. The reason is obvious to the discerning – the coronavirus pandemic. Right now, many of the top remittance-sending countries including Germany, United Kingdom, Saudi Arabia, France and the US are struggling under the impact of the coronavirus and attendant prevention protocol especially the lockdown and movement restriction. These economies are currently seeking to restart.

The World Bank, in its recent report, “COVID-19 Crisis Through a Migration Lens,” predicts that remittance flows will decline by 20 per cent globally as the coronavirus pandemic and associated control protocols have rendered millions of people unemployed across the world.

The truth be told, when migrants seek greener pastures abroad, it is not just for themselves. It is also for family members especially those left behind. And many times, the funds needed to leave is sourced through these family connections.

So as soon as they find their feet and begin to earn. Comfort is hardly the first thing that comes to mind. It is sending money home. It is paying back for the support.

Another essential driver of remittance is that the flow of money is not connected to bank accounts. The Western Unions and MoneyGram’s of this world make it possible to receive money without owning a bank account. This is important because many beneficiaries of remittance do not have bank accounts.

Studies indicate that there is a positive correlation between remittance on one hand and GDP, gross capital formation, domestic saving and household final consumption expenditure in the other.

The use of remittance income in Mexico (2007) Jim Airola notes that “…remittance-receiving households spend a greater share of total income on durable goods, healthcare, and housing.”

Flory Anette Dieck-Assad, Ernesti F. Peralta et al. explained in The Importance of Remittances Income in Mexico (1995 to 2017) that “there is a causal relationship between remittances and the service sector GDP, but not for industrial GDP.”

Undoubtedly, remittances are today a major financial resource. While it may be debatable just how much remittance contributes to a country’s economic growth there is no argument that it does – in a big way.

Sadly, in Nigeria, there are plenty of reports of how remittance is mismanaged, misappropriated and misused. It is clear that for citizens to be able to build assets with remittances there has to be greater money management and formal financial tools training.

Maybe it is time for Nigeria to take deliberate steps to on one hand seek to maintain an increasing trend of remittance in the coming years and on the other work to grow it. This may prove an indispensable key for the nation’s socio-economic development.

Some questions need answers. What sort of policies can enable a country to increase its remittance inflow? In what way can recipients be educated on improving the use of remitted monies? How much of an influence can sender have on the ultimate usage of the funds? Why are migrants so successful?

We can only attempt to answer the latter question here. There are so many reasons why migrants are successful, but two stand out.

Migrants understand the power of education. They literally jump on it. Through access to education, they can prepare to take advantage of the culture and opportunities of the new country. Nigerians in America have been identified as perhaps the most read groups with many possessing multiple degrees.

Migrants are relentless in the pursuit of education. They sacrifice, they invest and very literally give themselves to it.

Secondly, they are prepared to work, sometimes twice as hard as everyone else. They are equally willing in the short term to take on all sort of odd jobs while pursuing their goals. They are usually anxious to quickly find their feet and be able to send something home.

The unintended consequence of remittance is more migration. Others want to follow suit. The rise in remittance over the years is therefore unsurprisingly tied to the increase in the number of people seeking the proverbial golden fleece.

Besides, experts point to the growth of digital and mobile penetration across the continent as a huge contributing factor to the growth in remittances.

The truth is that today, remittance may well be the magic bullet that is sustaining the poor across the continent. The impact of remittance of the poverty index can be appreciated but maybe not quite totally calculated or calculatable.

There is one noticeable drawback in the remittance tale – this is the remittance gap among African countries. It is difficult to send money across Africa, from one African country to another. The culprits include a lack of African owned and dedicated platforms, currency exchange challenges and governments. Homegrown, Africa remittance solutions are needed, urgently.

Remittance provides a means of escape from poverty for those left behind. It fills the gap. It provides relief. Access to remittance in many instances is the start of asset building for many.

In the foreseeable future, migration will continue to grow. It will continue to drive remittance. The quest for a better life and to help others will continue to spur migration. It is a closed-loop.

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