Despite the global financial crisis, which erupted in 2008 that is yet to abate in Europe and United States of America, estimates from the World Bank has put offshore remittances to Nigeria at $21.0 billion (N3.3 trillion).
The World Bank estimates, which was quoted by FBN Capital, is consistent with the Central Bank of Nigeria (CBN) balance of payment (BoP) data, which show a steady increase in remittance from $14.5 billion in 2005 to $20.6 billion in 2011 with the exception of a small dip in 2008 as a result of the global credit event. The BoP puts gas sales at $7.0 billion, non-hydrocarbons exports at $3.2 billion and transport credits on the services account at $1.6 billion.
The estimates also revealed that remittances in 2012 were equivalent to 8.4 per cent of Nigeria’s gross domestic products (GDP). The World Bank numbers also showed that remittances were the second largest forex inflow in 2012 after crude petroleum.
But experts have called for more transparency from local banks dealing with remittances. They argued that the lack of transparency in the transactions makes the ultimate destination of the remittances is unclear.
According to experts at FBN Capital, “The banks are required to record the transaction but not its purpose. We are therefore obliged to make informed guesses. The predominant transaction used to be a transfer by an emigrant to the town/village of his/her origin. The objective (and scale) has since diversified.”
FBN Capital however submitted that remittances may have contributed to the retail buying frenzy on the Nigerian Stock Exchange (NSE) now and before its last crash in 2008. Some, they added, might have been invested in property development in the larger cities.
They added: “The Federal Government of Nigeria (FGN) plans to follow its forthcoming $1billion Eurobond with an issue for the Nigerian Diaspora. It has a modest $100 million in mind and argues that it does not have the track record in this field of, say, Israel or India. In our view the main challenge will be not the unfamiliarity of the product but the poor return: the first Eurobond yields just above 4 per cent and the shrewd investor will do better in other asset classes.
FBN Capital noted that the FGN and also the state governments could tap the Diaspora more often and more substantially for their financing needs.
They also pointed out that the World Bank and CBN series probably understate the inflows since they are limited to transactions in the formal economy through the banking system.
“One reason for making a transfer outside that system is the cost. The bank maintains a database for the cost of remittances: it reveals that the cost of making a transfer to sub-Saharan Africa in Q3 2012 represented 12.4 per cent of the amount transferred, compared with 6.5 per cent in South Asia, ” they said.
Source: Thisday (by Eromosele Abiodun)
