Nigeria’s Diaspora remittances exceed oil receipts for 4yrs running
…highlight need to harness human capital potential
Remittances by Nigerians in the Disapora have for the fourth year running exceeded the country’s receipts from oil. Analysts say this is an indication that the country will do well to tap the potential in its greatest asset – human capital – rather than concentrating on oil that has over time failed to lift its citizens out of the poverty trap. Nigeria currently boasts of a population of about 190 million, with a population growth rate of 2.6 percent.
Since 2015, at the peak of the collapse in oil prices that started a year earlier, the amount of money sent in by Nigerians living overseas through official means has continued to outstrip receipts from oil, considered the country major foreign exchange earner.
While Diaspora remittances into the country surged 20.6 percent to $25.1 billion in 2018, from $20.8 billion in 2014, revenue from oil plunged 57.4 percent to $18 billion in 2018, from as high as $42.7 billion in 2014, according to data obtained from the Central Bank’s quarterly reports and analysed by BusinessDay. These remittances naturally exclude transfers made through unofficial channels.
A similar trend was recorded in the preceding years of 2017, 2016 and 2015 when remittances stood at $22 billion, $19.7 billion and $21.2 billion, respectively, as against oil revenues of $13.4 billion, $10.4 billion and $19.6 billion, respectively, within the same periods.
This is contrary to the situation prior to 2015, when oil prices averaged around $100 per barrel and receipts from crude oil sales stayed well above Diaspora remittances. But with the increasing number of paid Nigerians abroad and a fall in crude prices, remittances overtook revenue from oil, accounting for more than 95 percent of the total transfers.
Analysts argue that Africa’s second-largest economy (in monetary terms supposing the market-determined exchange rate at $1/N362) is a human capital producing country rather than an oil producing one because Diaspora flows far exceed gross oil revenues.
Emeka Ucheaga, CEO at Lagos-based investment and advisory firm, EUA Intelligence, said the growth in remittances can be traced to the rising wages abroad which are products of tax cuts in America and increases in the minimum wage in parts of America and Europe.
“With the increasing number of Nigerians in the Diaspora, I think this was bound to happen at some point. However, the widening gap between remittances and oil revenue is a positive surprise,” Ucheaga said.
“Hence, we should expect remittances to increase as more Nigerians become gainfully employed abroad,” he added.
Analysts at FBN Quest say the ease of making remittances and transaction times have greatly been boosted by an improvement in mobile telephony.
According to Ucheaga, the increase in remittance inflows into the country serves as excellent news for the economy as high dependence on crude oil as a major source of foreign exchange earnings for the country continues to decline.
He explained that the development will mean that the country’s currency and foreign reserves will be less volatile to changes in crude oil prices and gradually become more influenced by variations in remittances.
“And we are already seeing the benefit of this. Despite the huge drop in crude oil prices between September and December, naira remained stable throughout the period, further emphasising that our currency is less dependent on crude oil exports for stability. A well-diversified source of foreign earnings is always required to ensure exchange rate stability over time,” he noted.
But despite increasing inflows from its citizens abroad, Nigeria has continually failed in two of the biggest indices needed in driving its human capital across board.
Data from the United Nations Development Programme (UNDP), a non-governmental agency established in 1990 to measure national achievements in health, education and income or standard of living, show that human development in Nigeria has been low compared with other countries of the world.
Despite recording a relative improvement in HDI, Nigeria ranked 157th position out of the 189 countries surveyed in 2017.