Remittances to LMICs to slip to $978bn in two years

In the two-year period of 2020 and 2021, remittances to low and middle income countries will experience significant decline to the tune of $978 billion.

This is according to a new report published in the World Bank’s Migration and Development Brief, which says the amount of money migrant workers send to their home countries could decline by 14 per cent by 2021 compared to the pre-COVID-19 levels in 2019.

The World Bank said remittance flows to low and middle-income countries (LMICs) is projected to drop by an initial 7 to $508 billion this year, before declining by a further by 7.5 per cent to $470 billion in 2021.

With a strong Diaspora representation, remittance to Nigeria is expected to decline by over $2 billion or 8.44 per cent to $21.7 billion from the 2019 level, remaining the largest in the Sub-Saharan region, nonetheless.

The amount is expected to rank seventh‐largest recipient of Diaspora remittances among LMICs notwithstanding, with Ghana, Kenya, and Senegal possibly ranking respectively a distant second, third, and fourth in the region, with an estimated amount of $3.2 billion, $2.9 billion, and $2.3 billion, respectively.

South Sudan has reported the region’s highest share of remittances to GDP, at more than 35.4 per cent, followed by Lesotho (20.6 per cent), the Gambia (14.9 per cent), Cabo Verde (12 per cent), and Comoros (10.8 per cent).

The drop in 2020 and 2021, the report titled “Phase II: COVID-10 crisis through a migration lens,” said will affect all regions, with the steepest drop of 16 per cent and 8 per cent respectively expected in Europe and Central Asia; followed by East Asia and the Pacific, 11 per cent and 4 per cent; the Middle East and North Africa, 8 per cent in both years; and Sub-Saharan Africa, 9 per cent and 6 per cent; South Asia, 4 per cent and 11 per cent; while Latin America and the Caribbean could record 0.2 per cent and 8 per cent slide.

“The foremost factors driving the decline in remittances include weak economic growth and employment levels in migrant-hosting countries, weak oil prices; and depreciation of the currencies of remittance-source countries against the US dollar,” the World Bank explained.

David Malpass, World Bank Group President

Remittances, the report acknowledged, are helping to address the impact on the African households.

Initial data by the Central Bank of Nigeria (CBN) says Nigeria received $17.57 billion in direct diaspora remittances in the first 11 months of last year, rising by 56.4 per cent from $11.23 billion within the same period in 2018.

Last year also, PwC had estimated that migrant remittances to Nigeria could grow to US$25.5 billio, $29.8 billion and $34.8 billion in 2019, 2021 and 2023 respectively.

According to Mamta Murthi, vice president for Human Development and Chair of the Migration Steering Group of the World Bank, “the impact of COVID-19 is pervasive when viewed through a migration lens as it affects migrants and their families who rely on remittances.”

“The World Bank will continue working with partners and countries to keep the remittance lifeline flowing, and to help sustain human capital development,” he assured.

Remittance flows to LMICs, according to the World Bank, touched a record high of $548 billion in 2019, larger than foreign direct investment flows ($534 billion) and overseas development assistance (about $166 billion); even as “the gap between remittance flows and FDI is expected to widen further as FDI is expected to decline more sharply.”

Dilip Ratha, lead author of the Brief and head of KNOMAD, explained that “migrants are suffering greater health risks and unemployment during this crisis. The underlying fundamentals driving remittances are weak and this is not the time to take our eyes off the downside risks to the remittance lifelines.”