Some members of the Organised Private Sector have urged the government to strive to create a business-friendly environment in Nigeria as this would attract more diaspora remittances.
They pointed out that diaspora remittances have emerged as a critical pillar of Nigeria’s economy, with the inflow surpassing foreign direct investment in recent years.
According to the World Bank, Nigeria received $20.1bn in diaspora remittances in 2022, representing 4.7 per cent of the country’s Gross Domestic Product. This contribution highlights the vital role of the diaspora in stabilising the economy amid declining oil revenues and global financial uncertainty.
A 2023 report by PwC projected that diaspora remittances could hit $34.8bn by 2028 if properly harnessed. However, the transformative potential of these funds extends beyond individual welfare; they can catalyse infrastructure development, industrial growth, and job creation.
Despite the impressive inflows, experts argue that Nigeria has yet to fully capitalise on diaspora remittances for national development.
Also, a 2022 study by the African Development Bank revealed that only 25 per cent of remittances are channelled into productive investments, with the remainder primarily used for consumption.
However, to reverse this trend, the Nigerian government has introduced several initiatives to attract diaspora investments. The establishment of the Nigerians in the Diaspora Commission and the launch of diaspora bonds in 2017 were steps in engaging the diaspora community.
The government had noted that the diaspora bond raised $300m, reflecting the trust and willingness of Nigerians abroad to invest in their home country.
However, the OPS says more structured policies are needed to unlock the full potential of these investments. For instance, creating incentives such as tax breaks, investment guarantees, and access to land for diaspora investors that promote a business-friendly environment could significantly boost participation.
Recall that the Central Bank of Nigeria introduced the Naira4Dollar scheme in 2022 to boost exports and attract foreign direct investments. Through this initiative, the CBN provided a rebate of N5 for every $1 remitted by exporters and investors via licensed International Money Transfer Operators.
Yet, high transaction costs and exchange rate disparities remain obstacles.
A World Bank report noted that Nigeria’s remittance costs are among the highest in Sub-Saharan Africa, averaging 8.9 per cent.
Speaking with The PUNCH, the Director-General of the Nigeria Employers’ Consultative Association, Mr Adewale-Smatt Oyerinde, stressed the significance of diaspora remittance, noting that with a large and growing number of Nigerians living abroad, many of whom send money back home, it serves as a vital source of foreign exchange for the country.
Oyerinde said, “The current economic challenges and perceptions have limited the potential of diaspora remittances, as much of the funds are spent on daily needs like food and shelter. To maximise their impact, remittances should be directed toward driving investments.”
He emphasised the need for the government to build citizens’ confidence abroad and create a business-friendly environment to encourage diaspora investments.
The NECA boss said, “While making and remitting money is crucial, the central bank’s main challenge is that much of the diaspora remittance bypasses the banking system.”
Oyerinde highlighted that much of the foreign exchange entering Nigeria discreetly is significantly larger than what flows through the banking system.
He urged the government to foster confidence and ensure returns to attract more formalised diaspora investments.
Also, the President of the Association of Senior Staff of Banks, Insurance and Financial Institutions, Olusoji Oluwole, said, “Diaspora remittances increase the external holdings of the country and financial institutions if sent in a tradable currency like the US dollar. These reserves fund productive activities that will in turn aid development.
“Even though these remittances are meant to augment the income of beneficiaries, some of them invest them in profitable ventures which again is good for the economy particularly the informal sector where jobs are created and provides additional tax income for the government.”
Also, a financial analyst, Mr Tuyor Otubanjo, said, “Harnessing diaspora remittances and investments effectively requires a multi-pronged approach, including improved governance, transparency, and accountability.
“By creating an enabling environment and leveraging the financial and intellectual capital of its diaspora, Nigeria can transform remittances into a strategic resource for sustainable development.”
