African diaspora investment - Nigeria Ranks First

August 25, 2021 | by: David Kodjani

If the African diaspora is considered today as the "sixth region" of Africa, it is because we can no longer ignore its demographic, economic and political weight.

Indeed, this diaspora is 16 million people in North America, 112.65 million in Latin America, 13.56 million in the Caribbean and 3.51 million in Europe.

Its economic weight is undeniable. Thus, in 2017 Africans in the diaspora transferred more than $ 65 billion in funds to their countries of origin, according to figures from the African Institute for Remittances (AIR). This amount represents more than double the official development assistance received by the continent during the same year, which amounted to $ 29 billion. Yet few African countries are developing a real policy of mobilizing the financial resources of the diaspora. Overview.

Most of the analysis carried out by the World Bank and other institutions indicate that it is sub-Saharan Africa that records the most remittances from its diaspora. According to the Bretton Woods institution, the region received more than $ 42 billion in remittances in 2017, or nearly 65% ​​of the remittances recorded by the AIR for the continent during the same year. This amount even increased to reach $ 46 billion in 2018.

With nearly $ 24.3 billion received in 2018, Nigeria ranks first among African countries receiving the most funding from their diasporas. It is ahead of Ghana ($ 3.8 billion), Kenya ($ 2.7 billion), Senegal ($ 2.2 billion) and Zimbabwe which completes this top five with $ 1.9 billion.

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Despite the enormous potential represented by diaspora remittances, African countries are struggling to make them a real source of funding for their development projects. Apart from the fact that a good part of these remittances pass through the informal circuit, this situation is due to the purpose of the remittances made by African migrants.

Indeed, many studies indicate that the remittances made by the African diaspora to the continent are mainly oriented towards consumer spending. According to the World Bank, two-thirds of the funds transferred are used to meet the needs of daily life, namely to buy consumer goods and pay health or school fees. They therefore do not really come to feed the formal circuits of production and wealth creation, nor to finance investment projects.

According to a UNCTAD report, by 2030, the Sustainable Development Goals will require investments to the tune of $ 40.9 billion per year. For comparison, the World Bank estimates that in 2019, $ 48 billion in remittances should be made by the African diaspora, just to sub-Saharan Africa.

According to Dilip Ratha, an economist at the World Bank, "if one in ten diaspora members could be convinced to invest $ 1,000 in their country of origin, Africa would thus collect $ 3 billion per year for finance development ".

Unfortunately, most African countries have not yet managed to put in place a real strategy to involve their diaspora in the economic development of their countries of origin.

More than thirty African countries have set up services or ministries responsible for arousing the interest of the diaspora, but these often lack the means.

However, some countries stand out by adopting real financing mobilization policies targeting their diasporas. Nigeria is one of the most striking examples of the capacity of members of the African diaspora to mobilize to finance development projects in their countries. In 2017, the West African country achieved the feat of raising more than $ 300 million in a single day, thanks to a diaspora bond issue, aimed at carrying out infrastructure projects.

I can't wait for other countries to follow suit.

Source: Ecofin Hebdo, Africa Renewal

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