Covid 19: Africa to witness decline in Diaspora remittances – FDC

 Financial Derivatives Company Limited has said the recent increase in the unemployment rate in developed countries, following the coronavirus outbreak is likely  to reduce Diaspora remittances inflows into African countries. Managing Director Financial Derivatives Company, Bismarck Rewane  in his recent report tagged ” FDC AfrisCope”  said Covid-19 has adversely affected employment in Africa and other parts of the world, noting that US employment claims have jumped by another 1.5 million to a staggering 45.7 million persons. He said African migrants across countries in Europe, North America, Middle East and Asia have lost their job or had a pay cut due to the outbreak and lockdown. He explained that there is a negative relationship between remittance inflows and unemployment, such that the higher unemployment rate abroad the lower diaspora remittances flows to the home country. He stated that over the years remittances have contributed to the forex inflow of many low to middle -income developing countries, especially in sub-Saharan Africa. 
Quoting a World Bank report, he said remittances inflows will fall by 23.1 per cent to $37 billion in 2020 while in 2019 remittances to sub-Sahara dropped by 0.5 per cent to $48 billion. He further said that remittances are crucial to low and Middle income countries because it is expected that foreign direct investment from more formal sources will drop by 35 per cent owing to travel restrictions, International trade disruptions and volatile stock prices across African countries. He stated that job cuts in countries like the US, UK, France and China will result in a further decline in money transfers from abroad, adding that the fall in GDP in these countries will hurt remittances to Africa. He explained that  US and UK economies shrank by 4.8 per cent in first quarter 2020 and 20.4 per cent in April 2020 respectively will compound the pressure on the external reserves, exchange rate and aggregate demand of African countries, especially countries in which remittances contribute immensely to their GDP.
 He said Nigeria is by far the largest recipient of remittance inflows in Africa, accounting for $23.8 billion in 2019, followed by Ghana with $3.5 billion and Kenya $2.8 billion. He said in south Sudan remittances of $1.3 billion accounted for 34 per cent of its GDP, noting that sending money to recipients in sub-Saharan African remains the most expensive in the world with a nine per cent charge for an average transfer of about $200.

Leave a Reply