Country Manager of World Remit at Nigeria and Ghana, Gbenga Okejimi, in this interview speaks on how inbound remittances is helping to shape Nigerian economy, supported by AFCFTA. Omolabake Fasogbon brings the excerpt:
Nigeria has recorded a steady increase in remittances since 2010, what do you think is responsible for this?
It is a known fact that Nigerians are well travelled. The increasing migration of Nigerians to other countries for education, better economic life, tourism, trade among others has played a huge role in the size of remittances recorded over the years. Due to the increase in trade activities between Nigeria and her neighbours, expansion of Nigerian banks to other African jurisdictions, remittances have also been on the increase. We should expect further increase in size with the signing of the African Continental Free Trade Agreement (AFCFTA) which is designed to aid seamless trade among African countries. This will reduce the barriers to trade and migration within the African continent as more countries review their Visa requirements.
With over $17 billion received from direct diaspora remittances between January and November 2019 according to the Central Bank of Nigeria, what does Nigerian economy stand to gain from this development?
The World Bank estimates that remittances are becoming a source of external financing for developing countries as global remittances in 2018 was over USD600billion in 2018. Locally, it has been estimated that remittances are about 2 times the size of receipts from crude oil sales, tax and custom collections. In 2018, remittances to Nigeria was USD 24billion while receipts from crude oil sales, tax and custom collections was about USD 10.8billion. This shows that the greatest export of Nigeria is actually Human Capital and not Oil. With these huge remittance flows, the government has been able to build its foreign exchange reserves and finance public spending and trade opportunities for individuals and corporates. Remittances have also unlocked education opportunities for many disadvantaged Nigerians. With an active diaspora base and proper harnessing of these resources, developmental initiatives of the government can be adequately financed. No doubt, remittances have contributed significantly to Nigeria’s Gross Domestic Product (GDP) and has served as a source of income for many to support household and health bills amongst others. It is therefore important that this flow is not disrupted, hence the need to increase awareness on digital transfer which has made remittances much easier.
How has digitisation impacted diaspora remittances?
Before now, both senders and receivers were at the mercy of agents of traditional players. Senders would usually spend almost the entire day to send funds to recipients who in turn spent additional hours to receive such funds in the bank especially in Africa where bank branches are concentrated in the urban centres. The advent of digitisation has greatly impacted the growth of remittances, we have seen an upsurge in the volumes as recorded by the World Bank yearly. It is estimated that digital remittance will grow from USD 183 billion in 2017 to USD 314 billion by 2021 according to Business Insider Intelligence.
Globally, there is a shift in remittances from traditional to digital practice. How has Nigeria been responding to this trend?
Traditional means of remittances involve visits to a brick and mortar store to send transfers. This is the practice of the traditional players and brings along with it challenges such as high costs, operational inefficiencies, inconvenience with travel and access etc. These are part of the reasons remittance costs by some competing services are higher. The technological advancement through Artificial Intelligence, APIs etc has not only assisted in reducing operational inefficiencies and brick and mortar costs, it has greatly impacted the cost of remittances in line with the United Nations Sustainable Development Goals to end poverty. To this end, technology has played a huge role in the expansion of digital transactions.
In Nigeria, even though remittances through electronic channels are showing encouraging signs, Cash Pick Up is still the dominant means of receiving transfers. It is trite to note that the Nigerian economy is largely cash-based as commerce is basically done with cash.
Taking most attention this period is the Coronavirus pandemic which has affected all sectors of the economy. How has this impacted diaspora remittances?
The Coronavirus pandemic is a scourge that has changed and still changing the way we do a lot of things. It is an emergency situation that has compelled governments across the world to become creative in its thinking and approach to governance. Governments have had to balance keeping the people safe from the plague and sustaining their economies. Covid-19 has definitely impacted diaspora remittances as we have seen an uptick in the use of digital channels like mobile money and bank transfers while the Cash Pick Up service has been challenged due to social distancing measures put in place by governments. At WorldRemit, we pioneered digital Money Transfer and the pandemic has assisted in driving home the message we have been preaching over the last 10 years. In some of the corridors where we operate, we have seen a complete shift to digital means of transfer. However, it is too early to say what this means as cash is still king in many markets.
How realistic is it that physical cash might go into extinction due to exposure to COVID-19 and other bacteria infections?
The journey to 100% use of e-money is a marathon and not a sprint. We have seen some deliberate actions by the CBN to reduce the use of cash. An example is the Cashless Policy which aims to discourage the use of cash by charging customers for cash deposit or withdrawal at a certain threshold. Policies like this along with others like TSA, IPPIS has assisted to manage government spending more efficiently and plug leakages. In terms of remittances, cash is prevalent and the most acceptable means of receiving transfers especially in corridors like the Philippines, Zimbabwe etc.
Can you mention some of the challenges facing digital money transfer service in Nigeria?
Digital Money Transfer has been able to mitigate some of the operational inefficiencies of non-digital means. There are always continuous improvements in terms of development and investment into technology. We keep working to improve the systems and meet the growing demands of our customers. We continue to educate our customers on the benefits of digital remittances. There is much work to do with building trust in the concept of digital transfers and its security.
Nigeria happens to be WorldRemit second biggest market in the world. What is the attraction in Nigeria
Nigeria remains a major market for WorldRemit. Nigerians are known globally in major economies of the World in the areas of education, entertainment, sports and economy etc. Nigeria has exported its trade to other parts of the world and most Nigerians are doing quite well. The continuing migration of Nigerians to other parts of the world will continue to be an attraction for remittance players. It is key to note that Nigerians not only receive from other countries. Outbound transfers are also large considering transfers sent from Nigeria are to 198 of the 200 countries that remittance players operate from.
What is WorldRemit’s strength over other international money transfer operators?
WorldRemit is a company founded firm the experience of our Chairman, Mr Ismail Ahmed, a Somali migrant. The service was established based on Ismail’s experience while sending transfers to family members back home. It is a company with so much diversity and cultural values targeting Africans with the intention to make transfers seamless, flexible and cost-effective. We pride ourselves as a digital disruptor which is 100% digital on the send side yet offering multiple options on the receive side; this differentiates us from other players in the market. We are also a low cost player ensuring that transfers are sent at the most convenient and flexible rate.
Being WorldRemit’s first Nigeria Country Director, what are you bringing in board to Nigerians?
With an average of USD 25billion in remittance flows annually, Nigeria remains a key country and one of the biggest corridors for WorldRemit not only in Africa but globally. We have expanded our network with an additional 12 agents covering 3500 locations. We have both bank and non-bank agents to deepen penetration and customer reach. To provide a variety of choices for our customers and meet their growing demand, we commenced our Cash Pick up Service in 2019. This is in addition to our Bank Transfer, Airtime top-up and Mobile Money services. We are encouraged by the Financial Inclusion Policy of the CBN and are finalising a partnership with a major Mobile Money Operator to further deepen mobile money business. In the area of CSR, in conjunction with our partner Arsenal Football club and one of our local partners, we have invested in grassroots football through the Future Stars programme where a local Nigerian coach won the 2019 edition. The winner won the opportunity to fly to London and experience a week-long developmental coaching clinic at Arsenal Football Club. The World Bank estimated that the total value of international remittances was $689bn in 2018. Research compiled in 2019 by Dr. Gregory Thwaites, Research Director at WorldRemit, showed that the $689 billion in remittances that migrants send back home every year, keeps 3.5 million children in school worldwide. Twaites used a combination of UNESCO education statistics, World Bank remittance statistics, Nigeria, Pakistan, Tanzania and Uganda Living Standards Measurements Surveys and WorldRemit indicators. We continue to support education for our customers and families around the world.
Source:Thisday
