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.
THISDAY had reported that 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.
