Foreign remittances to Africa have increased over the years as more Africans are absorbed into the world’s job markets. To illustrate this growth, more than $540bn crossed borders to low and middle-income countries in 2020, surpassing development aid and FDI. The amount remitted to Sub-Saharan Africa (SSA) was a paltry $42bn with $17.2bn remitted to Nigeria alone. These amounts have been resilient despite the pandemic that left many jobless in the host countries.
Also, worth noting from the world bank report were the remittance costs. Africa had the highest remittance costs with a $200 transfer costing about 8.21%. This is way above the world’s average of 4.9% recorded in Asia. Intra-continent transfers were also among the highest in the world. For instance, the cost of sending money from South Africa to Botswana, Zambia and Malawi stood at 19.6%, 17%, and 16% respectively. Other expensive corridors included Kenya-Tanzania, Tanzania-Uganda, and Angola-Namibia. Bearing in mind that these remittances go directly into the pockets of family and relatives, their impact is huge as most of the money is used to finance education and other daily needs.
These remittances are poised to increase as more Africans are employed as expatriates. Another avenue that will significantly contribute to remittances is the uptake of remote jobs. As such, nations should create a conducive environment that will lower these remittance costs. One of the ways to lower these costs is through actualizing the African Continental Free Trade Area (AFCTA). This will see free movement of capital, labor, and goods resulting in lower transaction costs.
Another initiative is leveraging Africa’s FinTech prowess to facilitate global transfers. Africa has one of the most developed money transfer services such as M-Pesa. Through partnerships with international remittance services such as PayPal, Western Union, and MoneyGram many obstacles shall be eliminated thus reducing the time and costs involved in transferring money globally.
The most innovative and upcoming solution is the adoption of cryptocurrency and blockchain. Since most of the population has access to a smartphone and internet, receiving money shouldn’t be a challenge. This decentralized platform allows for speedy and low-cost peer-to-peer transfers thereby, providing the much-needed funds for development. As global remittances increasingly contribute to the GDP of African countries, lowering these costs will increase funds available for spending thereby contributing significantly to improved wellbeing since the funds are less susceptible to misappropriation when compared to development aid.