AFRICA’S largest economy, Nigeria is the largest recipient of remittances in sub Saharan Africa accounting for about $22.3 billion in remittances received in 2014.
Remittances as a share of GDP were highest for African countries like Lesotho (24%), the Gambia (20%), Liberia (19%), Senegal (11%), and Cabo Verde (9%).
While remittances to Africa are expected to rise by 3.2% to about $33 billion in 2014 according to the World Bank.
The average cost of remittances fell to about 7.9% of the value sent compared to 8.9% the year prior. However, overall, the cost of sending remittances to the region remains prohibitively high with prices reaching up to as high as 18 to 22 percent in some countries.
To be precise, the price of remitting to Sub-Saharan Africa remains above global levels, a double-digit 11.3% for sending the equivalent of USD 200, versus the global average of 7.9 percent. Nine out of the 10 most expensive corridors in the world are to countries in the region, with prices ranging from 18 percent to 22 percent.
Remittances are a highly important source of external capital flows to the continent and official figures show them to be the largest international flow of financial resources to the continent. According to the Overseas Development Institute (ODI), “reducing remittance charges to global average levels would generate $1.8 billion, enough to put 14 million children through primary school, or provide clean water to 21 million people. Transaction fees cost the region an estimated $1.8 billion annually.”
The Executive Director of First Atlantic Bank, Daniel Addo has advised that securitization of future remittances and trade, tourism, credit card and other future receivables could help developing countries including Ghana maintain access to international capital markets especially in times of crisis.
According to him, one of the innovative ways to maximise the benefits of remittances was through securitization.
Mr Addo who delivered a paper on the topic-’ Facilitating FDIs and Disporan Investments’ added: “Remittances are countercyclical; workers typically send more money home during periods of economic crisis in their native countries.”
He noted that the African Export- Import Bank (Afreximbank) had facilitated a number of such transactions in Ghana and Nigeria.
These Mr Addo mentioned include Afreximbank arranged for Ghana to borrow $40m in favor of a development bank where the loan was backed by Western Union remittance receivables.
Skye Bank has raised a $150million, five-year loan backed by remittances generated from Nigerians living abroad, he added.
Furthermore, international remittance flows into developing countries have grown rapidly especially in poor and lower middle income countries.
He was quick to added that for many developing countries, international remittance flow exceeds public foreign aid and foreign direct investment (FDI), stressing governments recognise of the potential of international remittances to significantly contribute to poverty alleviation, economic growth, and development.
To increased FDIs in Ghana and other parts of Africa, Mr Addo urged governments to establish and clearly communicate rules and regulations pertaining to the entry and operations of foreign investors in their respective countries.
Touching on the role of commercial banks and regulators, he called on banking sector regulators to relax Currency Conversion restrictions for the West African Monetary Zone (WAMZ) currencies at the first instance, and then for all Ecowas member states for both Current and Capital Accounts and allow the free movement and trading of currencies within the region.
FDI flows to developing economies reached a new high of $778 billion in 2013, accounting for 54 per cent of global inflows, although the growth rate slowed to 7 per cent, compared with an average growth rate over the past 10 years of 17 per cent, the Head of Balance of Payment Division Research Department at the Bank of Ghana, Eric Koranteng said.
He noted that developing Asia had emerged as the region with the highest FDI inflows, overtaking the European Union.
According to the World Investment Report 2014, FDI inflows to Africa rose by 4 per cent to $57 billion in 2013, driven by international and regional market-seeking and infrastructure investments funds.
The overall increase was driven by the Eastern and Southern African sub-regions, as others saw falling investments.
In Southern Africa, flows almost doubled to $13 billion, mainly due to record-high flows to South Africa and Mozambique.
In both countries, infrastructure was the main attraction, with investments in the gas sector in Mozambique also playing a role.
The Chief Executive of GIPC, Mrs Mawuena Trebarh said in a bid to attract diasporan investments, a Non-Resident Ghanaian Secretariat was established at GIPC to coordinate the activities of Non-Ghanaian Residents in Ghana.
African Eye News
