Agusto & Co has predicted that remittance flows into Nigeria would rise to about $26 billion by 2025, from $19.8 billion presently.
In a statement, Agusto & Co, stated that the increase
would be supported by improved economic conditions in advanced economies.
With $20.1 billion in remittances in 2021, Nigeria was the
second-highest recipient in Africa, trailing only Egypt ($28.3 billion).
“Therefore, Agusto & Co. expects remittance flows into
Nigeria to rise to about $26 billion by 2025. Given Nigeria’s high poverty
rate, which increases reliance on foreign aid, Agusto & Co. also
anticipates the need to finance the basic requirements of dependents to remain
the most important element driving remittances in the near to medium term,” the
statement added.
The credit rating agency also stated that Nigeria’s emigrant
base is currently skewed towards the economically productive middle-class
demographic, which is positive for remittances and underpins the need to devise
strategies targeted at this age group to ensure the sustainability of
remittances.
“However, given the significant contribution of students to
the emigrating population, Agusto & Co. expects a surge in remittance
inflows in the medium term. In June 2023, the CBN liberalised the foreign
exchange regime, doing away with market segmentation, collapsing all the
segments into a single exchange rate window – Investors and Exporters (I &
E) Window – and adopted a managed floating exchange rate regime,” the report
said.
“We believe that the unification of exchange rates would
also incentivise remittance inflows through official channels, particularly for
investment purposes, as it is likely to improve the FX liquidity position,
which would facilitate the repatriation of funds,” Agusto & Co averred.
According to Agusto & Co, remittances have proven to be
positively correlated with the income of immigrants and economic conditions in
the sending countries, maintaining that the slow economic recovery and cost of
living crises that confronted many developed economies in 2022 were indicative
of this trend and constrained remittance flows into Nigeria.
“This was further exacerbated by the implementation of
capital controls and other unpopular policies by the Central Bank of Nigeria
(CBN), which restricted inflows through official channels.
“Remittances from the diaspora have played an increasingly
essential role in Nigeria’s economy, serving as an important source of foreign
exchange earnings and a catalyst for economic growth and development.
“As more Nigerians, discouraged by the country’s gloomy
economic conditions, look overseas for opportunity, their remittances will
continue to play, a crucial role in sustaining the Nigerian economy,” the
statement affirmed.
Agusto & Co pointed out that the growth of the funds had
been exceptional, empowering dependents to meet their basic needs, pursue
education, access healthcare, and embark on entrepreneurial endeavours.
On the mass emigration wave, the report stated that Nigeria
had been dealing with the challenge of emigration and brain drain for decades
as a result of the rising number of people fleeing in search of greener
pastures amid the country’s dim economic prospects.
“This growing trend in emigration has been informally tagged
“Japa” – a Yoruba word that translates to “flee or run away.
“As more countries, particularly highly sought-after
destinations, have become more welcoming of immigrants as a result of the
global labour shortage experienced post-COVID-19, there are now more
opportunities than ever for migrants seeking employment in environments with
improved economic and living conditions,” Agusto & Co added.
It however, bemoaned that the widespread exodus has left
many businesses severely understaffed, which has stunted the expansion of a
variety of industries and lowered tax revenues for the government.
“Nonetheless, remittances from the diaspora provide foreign
exchange and capital injections to stimulate economic activity. Remittances are
also often utilised to support the livelihoods of dependents back home.
“Agusto & Co. believes that the surge in emigration
witnessed in 2022 is yet to translate to a commensurate rise in remittances as
the majority of the emigrants are students who will not be able to fully join
the labour force in their host countries until mid-2023,” the statement noted.