eNaira: Easing Nigeria’s Brain Gain with Diaspora Remittances

eNaira: Easing Nigeria’s Brain Gain with Diaspora Remittances

By Abdulrahman Abdulraheem

Nigeria, the Giant of Africa and the most populous black nation on
Earth has over the decades regarded agriculture, and later oil and gas, as the mainstay of her economy. The country’s successive economic planners from 1960 till date have often neglected the power of that huge population to make things happen and to contribute more productively to the GDP.

For the past 40 years or so, the attention has been on the Black Gold with its attendant shortcomings. Yes, the Black Gold is a money-spinner but its value chain is nothing to write home about as it doesn’t and cannot employ the country’s huge population.

The obsession with crude oil and the lip service paid to diversification over the years is the reason unemployment is put at 33 percent in the country today while under-employment is just as bad, if not worse.

In the 60s and 70s, Nigeria was the go-to country for Arabians,
Europeans and even Americans in search of quality education, world-class healthcare services and white-collar jobs as our institutions competed favourably with the very best across the world. Ghanaians, Indians, South Africans etc trooped to Nigeria in droves in search of better life. Nigeria was even rated above countries like Malaysia, Singapore, Indonesia, Brazil etc in terms of prospects for greatness. Population growth in geometric progression and economic growth in arithmetic progression later began to shrink the space, the standards dropped, the military bared its fangs, coups upon coups and political instability distorted the implementation of well-written national economic plans, corruption, favoritism, tribalism and nepotism took
centre stage as merit and competence suffered… Nigeria gradually became the shadow of its old self and no longer attracted the best.

Two key phrases – greener pastures and brain drain – made into the country’s national lexicon… Nigerian youths began to emigrate in droves in search of educational and professional fulfillment, and the good life that had become the exclusive luxury of the few soldiers and politicians in power, back home. Experts called it brain drain because the country lost its best teachers, doctors, nurses, sportsmen etc to serious countries who were more than willing to provide the enabling environment for them to thrive. Nigeria’s loss was their gain as these professionals have continued to add a lot of value to those societies at the expense of their country of birth and origin.

But there is no place like home. These nationals still have parents, siblings and friends back home who they care about. They also look back and invest in the country in terms of businesses and philanthropy.

So, the huge sums of money, often in hard currencies, that these men and women send across to Nigeria on a regular basis have contributed in no small measure to reflating the Nigerian economy. These diaspora remittances constitute the most underrated source of foreign exchange earners for the country.

Remittances are household income from foreign economies arising mainly from the temporary or permanent movement of people to those economies. Remittances include cash and noncash items that flow through formal channels such as electronic wire, or through informal channels, such as money or goods carried across borders.

According to the International Monetary Fund (IMF), remittances
help poorer recipients meet basic needs, fund cash and non-cash
investments, finance education, foster new businesses, service debt and essentially, drive economic growth.

According to the World Bank, around $23.89.4 billion was sent to
Nigeria in 2019 from the Diaspora. The Bank stated that the Nigerian Diaspora of about 1.7 million population remitted $65.34bn in three years to boost economic activities in the country.

According to the World Bank data, in 2018, the Nigerian Diaspora
remittance was $24.31bn; in 2019, it dropped to $23.81bn; and in 2020, it fell to $17.21bn.

According to the Data, remittance inflow made up four percent of
Nigeria’s Gross Domestic Product in 2020. This puts the average
remittance per Nigerian abroad (based on 2020 Diaspora population of 1.7m) at $38,428.15 across the three years.
According to the United Nations Department of Economic and Social Affairs, diaspora remittance made up a larger share of Bangladesh’s GDP, more than that of Nigeria and India. Remittances as a share of GDP in 2020 was four per cent in Nigeria, 3.1 per cent for India, and 6.6 per cent for Bangladesh.

There are possibilities, however, that the Nigerian Diaspora population is larger than what has been officially captured. The Chairman of the Nigerians in Diaspora Commission (NIDCOM), Mrs Abike Dabiri-Erewa, had in 2017 said there were about 15 million Nigerians in various parts of the world.

There is also another possibility that remittances to Nigeria are much higher than have been officially captured. This is because many Nigerians abroad explore unofficial ways of sending home money in order to maximise unofficial exchange rates.
To increase official channels of Diaspora remittances, the Central
Bank rolled out a number of measures in the face of dwindling
foreign exchange from other sources.

The apex bank introduced the ‘Naira-4-Dollar’ policy as a means to increase the country’s foreign exchange inflow. The CBN introduced a rebate of N5 for every $1 of fund remitted to Nigeria through International Money Transfer Organisations (IMTOs), saying increased remittances ‘can only be accomplished if the remittance infrastructure improves and if the right policies are put in place’.

The then CBN’s governor, Godwin Emefiele, said: “Furthermore, in an effort to reduce the cost burden of remitting funds to Nigeria by working Nigerians in the Diaspora, the Central
Bank of Nigeria has introduced a rebate of N5 for every $1 of fund
remitted to Nigeria, through IMTOs licensed by the Central Bank.

“This rebate will be provided to the bank accounts of beneficiaries, following receipt of remittance inflows.
“We believe this new measure will help to make the process of sending remittance through formal bank channels cheaper and more convenient for Nigerians in the Diaspora.”

Price Water Coopers (PwC) had said the CBN’s policy may increase the country’s foreign remittances to $34.89bn by 2023.

Only twice has yearly total remittance inflow of Nigeria has only fallen below $20bn since 2011 – in 2016 and in 2020. In 2016, Nigeria recorded $19.7bn as official remittance.

In 2017, the Debt Management Office (DMO) issued a $300m Diaspora Bond and the proceeds were used to finance part of the deficit in the 2017 Appropriation Act.

The $300m was issued as part of the New External Borrowing of
N1.07tn specified in the 2017 Appropriation Act for part financing of the budget deficit.

According to a PWC report, Nigeria accounts for over a third of migrant remittance flows to Sub-Saharan Africa. PwC estimated that these flows amounted to US$23.63 billion (2017: US$22 billion) in 2018, and represented 6.1% of Nigeria’s GDP. The 2018 migrant remittances translate to 83% of the Federal Government budget in 2018 and 11 times the FDI flows in the same period.

Nigeria’s remittance inflows were also 7.4 times larger than the net official development assistance (foreign aid) received in 2017 of US$3.4 billion. PwC had in 2017 estimated that migrant remittances to Nigeria could grow to US$25.5bn, US$29.8bn and US$34.8bn in 2019, 2021 and 2023 respectively.

Over a 15-year period, PwC expects total remittance flows to Nigeria to grow by almost double in size from US$18.37 billion in 2009 to US$34.89 billion in 2023. The growth in remittances is subject to global economic forces, which could spur or hinder growth of remittance flows. Other factors that will drive remittance flows include growth in emigration rate, economic conditions of the resident countries and the economic fundamentals in the Nigerian economy.

The World Bank also projects remittances to Africa will grow by 4.2% in 2019, due to a moderation in global growth. According to the International Monetary Fund (IMF), remittances sent to Sub-Saharan Africa through informal channels, at 45 to 65% of formal flows, are significantly higher than in other regions. Overall, remittance flows were anticipated to keep expanding as a result of two factors: projected strong regional economic growth in 2019 and large intra- regional migration flows from the SSA region.

“It is therefore imperative that countries in the region, especially
Nigeria, take advantage of this trend in the course of strategic
economic decision-making. Remittance flows to Egypt and Nigeria account for the largest inflows of remittances into Africa in 2018. In 2017, Nigeria led the Continent in terms of remittance receipts but dropped to second place behind Egypt in 2018. There are two main reasons behind this growth. First, global economic growth, especially in high-income OECD countries. The World Bank Migration and Development Brief attributes the rebound experienced in the global remittance industry to economic growth in Europe, the Russian Federation and the United States. Second, there was a rise in oil prices, which boosted economic activities in oil-producing countries worldwide,” the report read in part.

It is evident that remittances can have a strong impact on
development, both at the macro and micro- level, especially as it has a multiplier effect on consumption, investment and economic growth.

Diaspora Remittances and Infrastructural Development

President Muhammadu Buhari once said in Glasgow, Scotland that the country needed about 1.5 trillion dollars over the course of ten years to address the problem of infrastructural decay. How can the Nigerian government take full advantage of these huge Diaspora funds to bridge the infrastructural gap and fix other areas of the economy?

According to PWC team of experts, the federal and sub-national
governments in Nigeria need to do the following:

A. Creation of platforms that increase accessibility of crucial
information for Nigerians in the Diaspora: The Nigerian diaspora constitutes mainly semi-skilled, skilled and highly skilled professionals.

They are in need of credible opportunities of investment with assured returns on their savings and earnings. A platform where information on opportunities can be shared will help to reduce information asymmetry when it comes to investment opportunities. Also, it is strategically important for state governments to also adopt these platforms to drive
and attract remittance flows from migrant indigenes toward
consumption, investment and development in their respective sub-Nationals.

B. Encouraging and creating pooled investment vehicles: One of the major barriers to investing for those in the diaspora is the minimum amount of funds, which investing firms accept. Therefore, pooled investment vehicles where members of Diaspora can be vetted and can aggregate funds for private equity investment for example, would
encourage greater investments.

C. Early-stage businesses with smaller financing needs, present another great opportunity for those in the diaspora to invest through angel networks: Facilitating these investment options in small-scale and medium-scale enterprises, joint ventures and micro-credits become pragmatic and viable opportunities for the diaspora (Pande, 2014b). Such efforts will also encourage employment-generating activities, reduce further emigration and save workers from exploitative conditions abroad by providing them alternative livelihood options in
their own country.

D. Cost of remittances and technology: The global average cost of sending $200 was 7.1% in the first quarter of 2018, more than twice as high as the Sustainable Development Goal 10 target of reducing the transaction costs of migrant remittances to less than 3%. Sub-Saharan Africa remains the most expensive place to send money to, where the average cost is 9.4% (about 25% higher there than in the rest of world). However, these costs have been decreasing over the last 10 years, partly because of the rise of mobile money technology. Today, mobile money transfers are two times less expensive than money transfer operators and post offices, and almost three times less costly than transfers through commercial banks. As mobile money technology continues to expand, and its coverage and usage continue to increase across Sub- Saharan Africa, it is expected to contribute to an increase in remittance flows. Several countries across the globe, including Nigeria, have developed plans towards attracting investment from their diaspora community for national development. Essentially, the extent to which the diaspora contributes to the developmental affairs of a
the country will be determined largely by trust. Sub-national governments (states) across most of these countries are also tapping into the immense opportunities in the diaspora space.

“In summary, what is required is a coherent policy framework to
harness remittances into generating capital for productive investments for the growth and development of small and micro-enterprises, which will in turn, create employment. In addition, remittances can be deployed toward philanthropic activities which can serve as solutions for specific deficiencies in the local infrastructure such as schools, hospitals and roads,” the experts concluded.

From Brain Drain to Brain Gain

As far as some Nigerians are concerned, the mass emigration of Nigerians to the Diaspora is good for the country as there are always two sides to a coin. It may be a drain at the beginning, it eventually becomes a gain in the long run as the nationals abroad always send money home for consumption by family members and investments which help the country to reflate its economy and create jobs.

An official of the Nigeria Diaspora Commission (NIDCOM) once had this to say: “Those people that left us to travel out, we thought it was brain-drain but when these people go, they also come back home to contribute to the development of our country. Some of them have established schools, hospitals, hotels, free treatment facilities etc.

During Covid-19, they brought equipment worth over 50 Million Naira. So, is that not a gain for us? We are also constantly in touch with them via zoom. They asked us what else we needed, how can they assist us etc. To us that is brain gain.”
Now that everyone can attest to the huge importance of diaspora remittances and also some of the bottlenecks Nigerians abroad face in sending money home, what role can technology play in easing the process and making sure Nigeria earns more from this huge gold mine?

eNaira to the Rescue

The Central Bank Digital Currency (CBDC), named eNaira, was unveiled on October 25, 2021, by former President Muhammadu Buhari to drive a more cashless, inclusive, and digital economy as well as complement the gains of previous monetary policy measures and fast-growing payments platforms.

The digital innovation is expected to support a resilient payment system ecosystem, encouraging rapid financial inclusion, reducing the cost of processing cash, enabling direct and transparent welfare intervention to citizens and increasing revenue and tax collection.
Essentially, the eNaira would also facilitate diaspora remittances, reducing the cost of financial transactions and improving the efficiency of payments.

According to the apex bank, the eNaira remains the country’s digital equivalent of the physical Naira.

“The eNaira – like the physical Naira – is a legal tender in Nigeria and a liability of the CBN. The eNaira and Naira will have the same value and will always be exchanged at 1 naira to 1 eNaira,” the bank noted.
The CBN therefore recently announced the introduction of its digital currency known as the eNaira as a payment option to recipients of diaspora remittance. The apex bank said the move was in furtherance of efforts to liberalise the payout of diaspora remittance.

The new policy was contained in the bank’s circular titled: “Operational Framework for eNaira Payment Option to Recipients of Diaspora Remittances,” and dated June 15, 2023.

The circular, which was obtained by Economic Confidential, was addressed to the IMTOs and the public.

The CBN said the guidelines in the circular signed by CBN Director, Trade and Exchange Department, Dr. Ozoemena Nnaji, would facilitate the payment of proceeds of diaspora remittances to recipients who choose eNaira as a payment alternative.

Under the guidelines, the IMTOs are required to apply for a one-time “No-Objection” to pay out in eNaira from the Central Bank of Nigeria (CBN).

The bank shall also provide account details where foreign currency from IMTOs shall be received. The CBN however, stressed that the receipt of proceeds of diaspora remittance in eNaira remained optional, adding that the option of the digital currency payout shall run concurrently with the dollar payout.
According to the framework, IMTOs are required to open merchant wallets through the CBN and pre-fund the CBN account with foreign currency.

The central bank will consequently fund the IMTO merchant wallet with eNaira equivalent of the foreign currency earlier pre-funded by the latter.

The CBN further explained that the payment procedure shall involve a sender initiating a diaspora transfer with an IMTO of choice overseas providing details of the beneficiary’s wallet.

The IMTO then logs into the eNaira web wallet portal, debits its eNaira merchant wallet, and credits the beneficiary with the eNaira equivalent of the foreign currency sent at the origin at the I&E window rate.

Alternatively, the apex bank noted, that IMTO could integrate with the eNaira portal from its platform via API provided by CBN and initiate the transfer of eNaira equivalent of the foreign currency sent at the origin at the I&E window rate.

Since the launch of the CBDC, it has been influencing and inspiring successes and breakthroughs in different facets of the country’s monetary economy. This is another notable landmark in the eNaira journey as it gives Nigerians the more viable option of receiving monies from their loved ones abroad via the digital platform. The ease with which the eNaira does the transactions will no doubt increase the volume of remittances coming into the country from the diaspora. Therein lies Nigeria’s brain gain from what used to be brain drain.

Abdulrahman Abdulraheem is the Managing Editor of PRNigeria and Economic Confidential