How online remittances fuel African economies - Remittance outlook 2020
The world is experiencing steady economic development within African countries. The potential growth of various African nations and sub-Saharan African countries are shining and showing signs of progress and prosperity over the next decade. In the past few years, the migration of Africans to other continents has increased. According to UN data OF 2017, around 25 million Africans are living outside their home continent. Remittance has become a lifeline in some homes in Africa, and thus the importance of African remittance market is also affected. Now funds obtained from overseas through relatives are used more than money. Various utilities such as bill payment, medical, education, rent and even groceries are met through online money transfer.
Various industries such as agriculture, health, technology and energy are boosted through funds, and this helps in substantial regional development.
Charges on online remittance to Africa and its impact on the economy
According to reports, around 40 billion dollars were sent by Africans working abroad in 2018. But the far cry is that the money transfer service providers charged exorbitantly on this fund and eventually suffocated the market. As per reports by overseas development institutes, Africa loses close to 1.8 billion dollars each year in the hands of excessive remittance charges by one Africans to other Africans in the diaspora.
As compared to other regions, online remittance to Africa is charged heavily with a significantly large margin as high as 20%, which is indeed very expensive.
Reduced remittance cost will surely benefit the region’s residents as remittance to sub-Saharan Africa constitutes 2.5% of the region's GDP. As outlined by the UN's sustainable development goals by 2030, remittance cost will be reduced to 3%.
2020 outlook - Economy of Africa
This year growth across the continent is expected to be moderate due to pandemic and a mixed bag of prospects. In 2019 Africa’s GDP stood at 2.9%, and 2020 GDP is slated at a scale of 3.2%. Modest economy acceleration is noted in Africa. This is because of a young and fast-growing population that drives private consumption; strengthening demand of products at the global level. New field development is expected by sustained investments in infrastructure development and increased crude output. Almost 40 developing nations are expected to post GDP growth rate by 5% and out of them, 19 countries are sub-Saharan Africa. Economic growth over Africa is expected to remain uneven. As per reports, it is noticed that in 2019 Nigeria was the best economy along with Angola and South Africa. It made about 60% of sub-Saharan annual economic output.
African remittance market 2020
In economic growth, remittance plays a key role and especially in Africa it is the key component. A research study by Pew Research centre reveals 8 out of 10 fastest-growing expat populations are nationals of sub-Saharan Africa who will fuel cross border remittance flow in the coming year. In 2018 according to Statista it is estimated that over 25 million expats remitted USD 46 billion from the sub-Saharan region. For many regions remittance income forms a significant source of foreign capital.
Let’s have a look at factors which will impact diaspora remittance to Africa this year
- African continental free trade agreement
After the ratification of the African continental free trade agreement (ACFTA), we expect the sub-Saharan Africa economy and forex to gain spur. This will establish the fastest free trade zone in the world and will boost intra-African trade. This change will push the African economy beyond the three trillion dollar mark by 2030.
- Oil price fluctuations
There will be a direct impact on African remittance 2020 due to rising oil prices and employment opportunities in OECD (Organisation for Economic Co-operation and Development) countries. Any changes in carbon fuel prices and movement in global currency or trade disputes will throw a significant impact on remittance inflows in many countries like Egypt, Nigeria, Angola, Libya, etc as work prospects and wages of emigrants will be affected.
- Egypt bill payment market
In 2018, Egypt was the fifth largest global recipient of inward remittances, with a value of USD 26.4 billion and the largest receiver of Africa online transfer. With the introduction of the Egypt bill payment market, it is expected to drive deeper FinTech penetration. This will have a positive impact on money transfer, bill payment, remittance process and cashless economy.
- Strategic marketing of NiDCOM
Nigeria the largest economy of Africa which brings over a third of expat remittance to sub-saharan Africa. The major inflow in Nigeria is from the US, which holds 30%. Some major contributors are the UK, Germany, Italy, Switzerland, Saudi Arabia, the UAE, Cameroon, Russia and China. The major cues for remittance growth in Nigeria 2020 is expected to come from the strategic implementation of NiDCOM (Nigerians in Diaspora Commission). This will encourage emigrant Nigerians to invest in the macro-economic growth of the country.
- Digitisation of FinTech policy implementation
For financially inclusive Africa, mobile money accounts for the way according to the IMF. Payments and investment and remittance technology account for 40% of all FinTech investments in African regions. Mobile money will help underserved Africans to receive funds for micro-economic activity and also circumvent poor banking infrastructure through expats and crush exorbitant remittance fees, which is one of the major drawbacks affecting the economy. High remittance fees, long transfer time, and multiple intermediaries have cost Africa over USD 1.8 BILLION IN 2019. Money transfer organisations like N2Xpress is working hard to cut the transfer cost by providing fast transfer at very affordable rates, and we try the best to align with the UN’s sustainable development goals (SDG)2030.
- Kenyan diaspora homecoming convention
Kenya is among the fourth-largest recipient countries of remittance in Africa. It is the largest source of foreign income for the country. However, remittance accounts for only 3% of the country’s GDP by incentivising diaspora remittance Kenya might experience emigrants to invest more funds back home by experiencing value investing through long-term bonds, tax breaks, risk mitigation protocols, etc.
N2Xpress money transfer platform helps you to do more than money. Now you can meet your daily utilities through cashless service. Our airtime wallet helps you to save more on online remittance and send money to your loved ones across the globe. For more details, you can contact us at email@example.com or leave your queries in the comment section below.