Egypt, Nigeria, Morocco Lead in Top African Destinations for Remittance Inflows
- A new report has shown that Egypt, Nigeria, and Morocco collectively receive 61% of all remittances sent to Africa
- In 2022, remittances made up over 16% of Africa's total government revenue, a figure that is double that of Latin America and the Caribbean.
- Remittances in Africa are comparable to, and even exceed, the amount received from taxes as a share of total government revenues
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Legit.ng journalist Victor Enengedi has over a decade's experience covering Energy, MSMEs, Technology and the stock market.
Egypt, Nigeria, and Morocco collectively receive 61.1% of all remittances sent to Africa.
This information was revealed by the Mo Ibrahim Foundation in its 2024 forum report titled ‘Financing Africa. Where is the Money?’.
Source: UGC
Released on June 18, the report highlights that Egypt is the top recipient of remittances in Africa, with $28.3 billion received in 2022, followed by Nigeria with $20.1 billion, and Morocco with $11.2 billion.
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According to a recent report by Legit.ng, data from the Central Bank of Nigeria revealed that total foreign remittances for May 2024 reached $365 million, an 80% increase from the May 2023 figure of $203.89 million.
Africa accounts for 12.3% of global remittances
The Mo Ibrahim Foundation report also states that Africa accounts for 12.3% of global remittances, totalling nearly $100 billion in 2022.
In 2022, remittances comprised over 16% of Africa’s total government revenue, a proportion twice that of Latin America and the Caribbean, which had the second-highest share at 7.9%.
This means that, compared to taxes, remittances represent a significant portion of Africa's government revenues.
From 2005 to 2022, remittances to Africa more than tripled, reaching $97.6 billion, equivalent to 3.5% of the continent's GDP in 2021.
The report stated:
“Compared to other regions, Africa accounts for 12.3% of global remittances of which Egypt, Nigeria and Morocco receive 61.1% combined.
“In 2022, Africa’s remittances of $96.7 billion represented 3.5% of the continent’s GDP, the highest of any world region."
The report highlighted that in 2022, remittances made up at least 4% of the GDP in 19 countries. This figure exceeded 20% in Gambia, Lesotho, Somalia, and Comoros.
The report also noted that when accurately tracked, these hard currency remittances can enhance a country’s creditworthiness and improve its sovereign risk ratings as assessed by credit rating agencies.
Importance of remittances to African economies
Around 160 million people born in Africa now live and work abroad, sending remittances that support an estimated 200 million family members, providing a crucial source of foreign currency.
The significance of remittances in relation to Africa's economy highlights their role as a vital income source.
When accurately recorded, these hard currency remittances can enhance a country's creditworthiness and sovereign risk ratings by credit rating agencies and serve as a foreign exchange source.
The report highlighted that remittances can act as a source of foreign exchange (FX).
In Nigeria, the Central Bank recently issued licenses to 14 new international money transfer operators (IMTOs) in an effort to double the amount of remittances entering the country.
It also pointed out that remittance flows could be used as collateral to improve the credit ratings of sub-sovereign borrowers.
It noted that, since 2000, several banks in developing countries have raised over $15 billion from international capital markets by leveraging remittance-backed securities.
Speaking on the matter, Ifeanyi Ubah, lead researcher at Commercio Partners, told Legit.ng that remittances to Africa play a crucial role in supporting the continent's economies and improving the livelihoods of millions.
He said:
"These financial transfers from abroad surpass traditional aid and are a lifeline for families, funding essential needs like education, healthcare, and housing.
"In other words, remittances drive economic growth by boosting local businesses and fostering entrepreneurship.
"However, high transfer costs and limited financial infrastructure pose significant challenges. Efforts to enhance digital payment systems and reduce fees are vital to maximizing the impact of these funds."
He added that strengthening remittance flows can contribute significantly to Africa's development and poverty reduction efforts.
IMF approves "Japa" as catalyst for remittances
In related news, Legit.ng reported that the International Monetary Fund (IMF) has urged the Federal Government of Nigeria to take advantage of the country's brain drain issue.
Abebe Selassie, the Director of the Africa Department of the IMF, said that the Nigerian government must begin to look at the positive side of the trend, which has sparked the widely popular "Japa syndrome".
He pointed out that the phenomenon could offer advantages to the Nigerian government through increased investments and crucial remittances, which have become increasingly significant for various African nations.
He noted that once they have moved abroad, governments can explore avenues to ensure their ongoing contributions, such as the significant role of remittances for numerous countries.
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Source: Legit.ng
