Nigerians in Diaspora: Will the Remittance Continue Forever?
On Wednesday 22nd May 2019, a friend forwarded an old news to me on Whatsapp. Never has an old piece of news startled me so much. The news was this: In 2017, Nigerians in Diaspora injected 22 billion dollars into the Nigerian economy. Price Water House Cooper was the author of the report, so it was a credible one. It got me thinking about Nigeria, its future, what the current government is doing and the prospects for the nation when the soft flow of money from the Diaspora begins to taper off. Nigeria as a nation did not plan ahead for the crash in the price of a barrel of oil and the consequences is still being felt by the nation.
It will serve the nation well to start planning now for that day when the inflow from the Diaspora won’t be as sizeable as they are now. The value of the Naira is artificially inflated by this cash injection and serves as a support. What will happen when this support weakens? With so much hard currency coming to support the Naira, why is the economy not doing better than it is? The economic incompetence of subsequent leaders must have been monumental.
We all know that Nigerians and other Africans in Diaspora push a great deal of resources into their home nation due to various reasons: investment, sentiments and philanthropic purposes, but I did not realise that it was as significant as this.
First, a plug for my book: You can buy my book by following this link: A Jar of Clay, Part 1: Made In Nigeria.
I wanted to build some understanding of our foreign exchange spending and earning. I as scoured the internet, I stumbled on the National Bureau of Statistics, owned by the Nigerian government. I took a look at our Import and export in 2018 and 2017.
For example in 2018, according to government official data, this is a summary of how we fared:
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We earned 52 billion dollars in foreign exchange (I converted to dollar at 360 naira to a dollar). Most of this comes from oil (49.5 billion dollars). However, we also spent 34 billion dollars on manufactured goods (just under 20 billion dollars) and importation of crude oil (just under 9 billion dollars). Another 2.367 billion dollars went on Agricultural Goods while 3.58 billion dollars went on Raw materials. Apart from the export of crude oil and Energy Goods, we don’t make much money from exports. Overall, we had a surplus of 18.5 billion dollars after deducting the cost of importation.
What about 2017?
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The story is very similar, though at a lower level of income. Crude oil brought in 36 billion dollars but we also imported close to 7 billion worth of oil related products leaving us with a balance of 29 billion dollars. Again, we exported less than a billion worth of manufactured goods but consumed close to 13 billion in import, depleting our foreign exchange.
If you look at the charts for 2017 and 2018, you will see that the import (shown in red) dominates the export (shown in blue) apart from crude oil itself.
Below I show a combined view of 2017 and 2018:
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Over the two years, you can see that in terms of exportation of crude oil and importation of oil related products, we are in the money: a net amount of 70 billion dollars accrued to the coffers of the federal government from oil alone.
Another positive story is that of Energy Goods (what are these things by the way? Let me know if you do). Nigeria made 54 million dollars in 2017 and 118 million dollars in 2018. It looks like a growing market. For the rest however, it is bleak. In 2017, we imported under 13 billion dollars worth of manufactured goods. By 2018, we were importing around 20 billions of manufactured goods. The amount spent on manufactured goods is close to half of net income from exportation of crude oil and importation of oil related products. This does not inspire confidence that our government is working on any strategy to reduce our dependence on oil.
Back to the story on the Foreign exchange injection into Nigeria from the Diaspora. If you go back to the first two charts in this post, you will see that in 2017 Nigeria earned a net value of just under 12 billion dollars from its exportation and importation business. In 2018, this net income rose to 18 billion dollars. Of course Nigeria also earns money from what is raised internally. For example, in 2017, the 36 states of the federation generated about 2.6 billion dollars for their own spending (these details can be extracted from a report on the National Bureau of Statistics web site called “Internally Generated Revenue At State Level”).
It makes perfect sense that our forex and internally generated income can sustain a budget of 26 billion dollars in 2018.
Yet, 22 billion dollars flowed in from the Diaspora. 84% of the budget for 2018. The impact of this inflow cannot be underestimated. It is an injection of liquidity that is helping to keep the Naira at its current level. It makes life extremely easy for the Nigerian government. That money helps to provide jobs, invest in dilapidated school structures that the government refused to renew and also steps in to carry social responsibility that should be resting on the government.
Will that flow continue forever? No, it would not. In the new Trump America and the increasing right wing nations in Europe (I write as people are beginning to digest the outcome of the European Union elections), there won’t be as many opportunities to come to Europe and America as was in the past. This is already clear. Many Nigerians have educated their bright children in Europe and North America but many of these children are no longer able to find opportunities abroad.
Apart from the doors of nations in the developed world closing to immigrants, Nigeria itself has not invested in young people as it did in the past. The burden of education is shouldered these days by the parent. Only well heeled parents are able to fund the best education for their children. Even if the doors of opportunities are wide open in Europe and America, the pool of Nigerians that can take advantages of the openings have shrank to the children of the very well heeled. This was not the case thirty years ago when ability alone is enough to make way for quality education.
The last reason why the flow of remittance may not last forever is that the connections that first generation immigrants to the Diaspora had to Nigeria is not the same as their children’s. First generation immigrants have connections to people and institutions. For example, the zeal with first generation immigrants invest in their Alma mater is commendable. As they grow older and go to their graves to rest in peace, their children won’t necessarily have the same commitment to their pet projects.
The economic competence of successive government in Nigeria has always been a source of concern. A look at the charts above confirms what is well know about how Nigeria has been governed: extract as much rent from assets and spend as much as you can and don’t bother to plan for the future.
You can buy my book by following this link: A Jar of Clay, Part 1: Made In Nigeria.
