Fall in Diaspora remittances, Nigeria’s Achilles heel
The surprise news that the US added 2.5million jobs in May against all analysts expectations and that unemployment fell to 13.3% was greeted with euphoria by investors. The impact was received with greater enthusiasm by developing economies, like Nigeria, who are the major recipients of diaspora workers’ remittances.
International immigrant worker remittances is estimated to be as high as $550bn with SSA getting as much as $48bn in 2019. The global recession of 2020 has been accompanied by huge layoffs. For instance, in the US over 40million workers have filed for jobless claims. When workers are furloughed, it is the immigrants and undocumented aliens who are the first on the firing line.
Therefore, Nigeria that received $25bn in 2019 in diaspora remittances, is likely to see this source fall to $18bn in 2020 because of layoffs of Nigerians overseas. It is the country’s second most important source of forex after oil and gas. Apart from the dollar receipts, it provides a social safety net for dependent relatives who are mostly victims of poverty and Covid-19
Trading activity falls sharply along with GDP growth
One of the most daunting effects of the COVID-19 lockdown is the disruption to trading activities. Nigeria’s share of world exports, which increased to 0.35% in 2019, is now projected to fall to 0.19% in 2020. Wholesale and retail trade accounts for approximately 15% of GDP and employs more than 25% of the labour force. A contraction in trading activities will adversely affect real GDP growth. The IMF is projecting a 3.4% contraction in the Nigerian economy in 2020. Nigeria’s ability to survive the economic downturn and avert a looming recession will be largely dependent on the implementation of reforms to promote a relatively self-sustaining economy even after the pandemic.
In this edition of the FDC bi-monthly publication, the FDC Think-Tank analyzes these issues and their implications on businesses and the economy at large.
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