African countries are staring at a significant decline in remittances from their citizens working abroad this year owing to the Covid-19 pandemic that has seen many migrants lose jobs and others grapple with reduced incomes.
This signals hardships to millions of African households that depend on their friends and relatives working abroad for a financial lifeline, with governments staring at declines in foreign exchange reserves.
A new report by the United Nations Economic Commission for Africa (Uneca) projects remittances—money sent by migrants back home—to drop by 5.4 percent to $41 billion in 2021 from $44 billion last year.
The report, titled “African regional review of implementation of the Global Compact for Safe, Orderly and Regular Migration”, shows that the bleak situation has been compounded by the high cost of sending money to Africa from abroad.
According to the report dated August 2021, the costs associated with sending remittances to Africa are still some of the highest in the world.
The report notes that a migrant sending $200 to his/her family in Africa pays an estimated nine percent of the value of the transaction, indicating that the continent is still far from achieving the three percent target set out in Sustainable Development Goal 10.
The Addis Ababa Action Agenda of the Third International Conference on Financing for Development and Sustainable Development Goal indicator 10(c) provides that countries should, by 2030, reduce to less than three percent the transaction costs of migrant remittances and eliminate remittance corridors with costs higher than five percent.
Remittances are estimated to constitute about 65 per cent of the income of some receiving countries and senders spend an estimated 15 percent of their income on remittances.
American research firm Brookings shows that the Covid-19 pandemic has hit migrants in various ways, including loss of jobs and reduced incomes, weakening their ability to send money home.
Weak oil prices have affected outward remittances to Africa from the Gulf Cooperation Council countries (Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates).
For 25 African countries, all of which have large diaspora populations, remittances are a primary source of national income.