Nigeria banking remittances

from Business Day

This article examines banking practices in Nigeria. - Kale

by BLESSING ANARO

Going by the recent Central Bank of Nigeria's (CBN) released chart which indicated that remittances from Nigerians in the diaspora helped to grow the macro economy, then it is unfortunate that the issue of monies remitted by Nigerians in the Diaspora is no longer being taken seriously, particularly by banks which should know better.

While banks dangle attractive rates to woo depositors, billions trickle into the system, which in most cases, are not well utilised because some of the benefactors of such remittances lack banking acumen.

A look at the official figures bandied by government agencies or other world bodies may be incorrect, because there is more money flowing in through unofficial than official quarters. This problem stems from the incorrect figure of the population of Diaspora Nigerians.

A research material prepared by Manuel Orozco of Inter-American Dialogue and Bryanna Millis, for review by the United States Agency for International Development, says Nigeria represents one of the more mobile societies in Africa with huge populations moving to the East, West, and South of Africa, as well as Europe and North America.

However, official statistics on Nigerian emigration are inaccurate and incomplete. For example, the United Nations reveals that there are approximately 1.1 million Nigerians living outside their home country, representing 0.84 percent of the Nigerian population. But this figure plainly falls short of the reality.

Just in West Africa, the trend of Nigerian migration is substantial. In Ghana alone, there are at least half a million Nigerians. Likewise, the large and growing outflow of the country's citizens to South Africa over the last 10 years makes it difficult to have confidence in the official figure of less than 20,000. In the United States, a single transfer company reports processing 125,000 transfers monthly to Nigeria, a figure that is nearly identical to the US Census estimate (134,940) of Nigerians in the U.S., including the UN estimate.

Data on migrants from countries with similar populations-in the range of 100-200 million people-show that on average, 3.9 percent of their nationals are living abroad. Applying that percentage to the Nigerian population gives a figure of 5,701,806 Nigerians abroad.

A World Bank report about the UK-Nigeria corridor claims from interviews with money transfer operators (MTOs), that there are five million Nigerians in the United States.

Another report argues that there are half a million Nigerians in England, adding that one-third of West Africans are living outside their country (Black et al. 2004).

The bottom line is that so much money is coming to the home system in the form of remittances. But what should ordinarily be a blessing to national development by increasing the amount of monies saved by Nigerians in the country, is witnessing a reversal.

Development bankers estimate that some $10 billion of remittances could be saved or invested if people had access to banks and were encouraged to use them. By banking part of their remittances, recipient families could earn interest, establish credit and provide money for local investment. The result would be more resources to help pay for schooling, starting small businesses or home ownership. Such savings and investments lead to economic growth; and growth, at the bottom of the economic scale, is the surest way to lift people out of poverty.

As of now, most banks in developing countries that receive remittances simply dole out the sums to recipients, after collecting part of the fee paid by the sender. They make no attempt to turn the recipients into bank customers. Bank officials and the politicians that oversee them need to do more to educate the poor about banking. They need to be reminded that such lending can be profitable" and will further broaden national goals for economic growth. To that end, remittances deserve a more prominent place on the agenda at the meetings of the World Bank, the International Monetary Fund and the Group of 8 leading industrialised nations. Unless those billions in remittances are banked, money that could fight poverty will be left on the table.

Apparently, only one bank in the country seems to be thinking in this direction. PHB Asset Management Limited, a subsidiary of Bank PHB plc, was recently selected to manage a $200 million (N24 billion) Diaspora Investment Fund (DIF) set up by the Nigerians in Diaspora Organisation, Europe (NIDOE)

The Diaspora Investment Fund is an innovative $200 million investment vehicle that engenders the dual goal of achieving capital growth for the individual investor, while facilitating Nigeria's economic growth.

Recently, Ngozi Okonjo-Iweala, former finance minister and now a World Bank chieftain, challenged fund managers in Nigeria to devise means of tapping into "Nigeria's money abroad."

She said they could either do this from money owned by Nigerians in the diaspora, which may be remitted for investments at home, or money saved abroad by Nigerians, otherwise called capital flight.

The World Bank chieftain noted that though not backed by statistics, there is evidence of high levels of capital flight from the Nigerian economy, partly due to lack of appropriate financing vehicles for domestic investors.

She spoke against the backdrop of the need to stimulate economic transformation in Nigeria through venture capital, noting that Africa's long-term development must be driven by economic growth from within. This, she stated, requires private capital.

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