DIASPORA remittances to low and middle income countries fell by 1.6% to $540bn last year from $548bn as a result of the impact of the coronavirus pandemic with Nigeria being mainly responsible for a 28% drop witnessed across Africa.
According to recent data from the World Bank, diaspora remittances fell by 27% year-on-year in 2020 to $17.2bn from $23.55bn in 2019. Across sub-Saharan Africa, however, there was an increase of 2.3% despite a 28% decline in remittance flows to Nigeria, according to the latest Migration and Development Brief from the World Bank.
This decline in recorded remittance flows last year was smaller than what was witnessed during the 2009 global financial crisis, when the drop was 4.8%. It was also far lower than the fall in foreign direct investment (FDI) flows to low and middle income countries, which, excluding China, fell by over 30% in 2020.
As a result, remittance flows to low and middle income countries surpassed the sum of FDI ($259bn) and overseas development assistance ($179bn) in 2020. The main drivers for the steady flow included fiscal stimulus that resulted in better-than-expected economic conditions in host countries, a shift in flows from cash to digital and from informal to formal channels and cyclical movements in oil prices and currency exchange rates.
Michal Rutkowski, the global director of social protection and jobs global practice at the World Bank, said: “As Covid-19 still devastates families around the world, remittances continue to provide a critical lifeline for the poor and vulnerable. Supportive policy responses, together with national social protection systems, should continue to be inclusive of all communities, including migrants.
“This relatively strong performance of remittance flows during the Covid-19 crisis has also highlighted the importance of timely availability of data. Given its growing significance as a source of external financing for low and middle-income countries, there is a need for better collection of data on remittances, in terms of frequency, timely reporting and granularity by corridor and channel.”
Remittance inflows rose in Latin America and the Caribbean (6.5%), South Asia (5.2%) and the Middle East and North Africa (2.3%). However, remittance flows fell for East Asia and the Pacific (7.9 %), for Europe and Central Asia (9.7 %) and for Sub-Saharan Africa (12.5%).
At the moment, the World Bank is assisting member states in monitoring the flow of remittances through various channels, the costs and convenience of sending money and regulations to protect financial integrity that affect remittance flows. It is also working with the G20 countries and the global community to reduce remittance costs and improve financial inclusion for the poor.