The World Bank has urged Nigeria and other nations with significant diaspora remittances to leverage these funds to fight poverty and finance other essential needs.

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This recommendation came in the latest Migration and Development Brief, revealing that diaspora inflows to Nigeria totaled $19.5 billion—slightly below the projected $20 billion but the highest in sub-Saharan Africa at 35 percent.

The report noted a decline in remittances across various regions. Nevertheless, remittances still outpaced Foreign Direct Investment (FDI) and Official Development Assistance (ODA). The World Bank predicts this trend will persist due to migration pressures driven by demographic changes, income gaps, and climate change.

“This is not to suggest that remittances could substitute for FDI or ODA. Developing countries need FDI, especially in critical infrastructure and green investments. They also need ODA to address public financing needs and externalities such as fragility and climate change. Instead, countries need to take note of the size and resilience of remittances and find ways to leverage these flows for poverty reduction, financing health and education, financial inclusion of households, and improving access to capital markets for state and non-state enterprises,” the report stated.

Sub-Saharan Africa bears the highest remittance costs, averaging 7.9 percent, compared to other regions. According to the World Bank, these costs include payments such as bank charges, money transfer operator fees, and stamp duties, often hidden by nontransparent foreign exchange markups.

“In many countries with multiple exchange rates, remittances tend to flow through unregulated channels. In such cases, the foreign currency may not even flow across borders, thus depriving the recipient country of access to foreign exchange,” the report added.

Earlier this year, Taiwo Oyedele, Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, noted that while the World Bank estimated Nigeria’s diaspora remittances at $20 billion in 2023, over 90 percent did not enter the country but were instead externalized. Many Nigerians now use digital apps and parallel market rates, crediting naira locally without bringing in the dollars.

To address this, the Central Bank of Nigeria has approved, in principle, 14 International Money Transfer Operators to strengthen remittance inflows through formal channels.