We think of remittances, ‘money for the folks back home’, as a couple of hundred rand a month. But in 2023, remittances to African countries surpassed $90-billion.
Many African citizens working in a foreign country send a portion of their earnings back home to family members. Not only are these remittances supporting the families receiving them, but they now play an increasingly important role in the economies of many African countries.
Globally, remittances have grown significantly over the last 10 years and today India, Mexico, China, the Philippines and France are the world’s top five remittance recipients of 2023. Two African countries, Egypt and Nigeria take 7th and 9th place respectively.
Egypt, Nigeria receive +$20bn a year
Egypt and Nigeria are two of Africa’s biggest economies and most populous countries. Egypt has around 112-million people and Nigeria has double that.
In Nigeria, remittances have contributed about 5% to the country’s GDP annually over the last 10 years. In Egypt, remittances reached 10% of the country’s GDP in 2017 and now sits at 6%. Over the last few years, the Egyptian government has been implementing policies to encourage and support its citizens working abroad to send money and assets back home.
The $20-billion that Nigerians annually send back to their country amounts to around $90 per capita. In Egypt, even though the total remittance amount has dropped since 2021, remittances still account for more than $200 per capita.
While the these larger economies are receiving large dollar amounts, it’s some of the smaller economies where these external inflows have potentially the largest impact. For example, Lesotho and The Gambia, which both have populations of under 3-million people.
In Lesotho remittances made up 24% of the national GDP in 2023. This was significantly higher in previous years but has decreased as the country’s diamond export industry started to grow.
In The Gambia, which relies on an agriculture-based economy, 2023 remittances accounted for over 26% of the GDP and the value of remittances per capita exceeded $220.
Improving the inflows
The fact that diaspora populations, in supporting their families back home, are also contributing to their country’s economies, is being taken increasingly seriously by African governments.
The central banks of Kenya, Uganda and the Gambia are improving data capturing and publication of remittance channels. Other countries are creating policy reforms that encourage remitting.
The effect of mobile money on remittances is also likely to be significant. Mobile money is quickly increasing access to banking, particularly for people in rural and underdeveloped areas.
Historically, remitting involved saving up all year to send a few hundred dollars at high costs, but now one can transfer much smaller sums much more frequently. Mobile money and improved internet channels are making these remits easier.
Catching up
Although exports still make up more of the GDP than remittances in most African states they are starting to compete with major exports. Kenya for example, receives more money from remittances than from their main global export – tea and coffee.
New ‘donors and developers’
There is a perception that charity, donations and development aid given by the Global North is all that is keeping African citizens and African economies afloat. Yet the combined totals of foreign aid and development assistance to Africa in 2022 was still $37-billion less than formal remittances from the African diaspora. (Note: 2022 is the most recent year the World Bank has aid data for.)
Africans working abroad are contributing substantially more to their home country’s development than aid-givers are.
While some African countries including South Africa, Madagascar, Botswana and Namibia as well as Ethiopia, Sudan and the DRC received more money from aid and development assistance than from remittances in 2022, many other African countries, including Ghana, Zimbabwe, Lesotho, The Gambia, Egypt, Nigeria, Morocco, Kenya, Eswatini, Liberia, Senegal and Guinea received more money from their own citizens than donors that year.
With aid to the continent shrinking over the last few years, remittance senders might be taking on the burden of healthcare and other social support.
Because remittance money is often directly sent to people in rural areas who may have no other sources of income, the decrease in aid to African countries likely means that family members working abroad have been bearing the cost of everyday necessities such as medical treatment or food.
Broad impact
While countries like Egypt and Nigeria have a large dollar amounts of remittances even smaller countries are benefitting from these inflows. Morocco is a standout when considering the amount of remittances in 2023 is equal to $320 per capita. Similarly Ghana, Senegal, Lesotho, Egypt and The Gambia all see remittances equal to +$100 per citizen and hinting at the broad impact sending money back home has for many people in Africa.
Notebook
- Because a large portion of remittances are sent through informal channels the real value of remittances may be larger than data shows. In addition, because most countries do not yet collect and publish remittance specific data, the data used in this newsletter is from the World Bank’s data bank.
- The remittance data is made up of World Bank staff estimates based the sum of ‘personal transfers and compensation of employees, defined in the IMF’s Balance of Payments Manual (6th Ed).
- The GDP data is from World Bank staff estimates based on IMF balance of payments data and OECD GDP estimates.
- Main image: Downtown Lagos/Canva.com
