Egypt is the highest recipient of remittances in Africa in 2019 with a total of $26.8 billion, said the Oxford Business Group, reporting they are mainly received from Arab countries, the US and the UK.
In a report issued on Thursday, Nigeria came in second, having received $23.8 billion in 2019, driven by remittances from the UK and the US.
The report showed that remittances from African migrants abroad grew by 3.5 percent in 2019 to reach $707 billion. On average, they account for 2.5 percent of the region’s GDP; however, for some smaller countries like Senegal, remittances make up around 10 percent of GDP.
Sub-Saharan Africa has the world’s highest average transfer cost for remittances, which is at nine percent, according to the report
The COVID-19 outbreak caused a global recession that has affected both labour markets and financial flows across the world, while the remittances are affected as well, which have increasingly been among the top contributors to GDP in many emerging markets over recent decades, continued the report.
On 22 April, a World Bank report predicted that remittances that are headed to low and middle-income countries would see the roughest decline in recent history over 2020, anticipated to fall by 19.7 percent to $445 billion, down from $554 billion in 2019.
According to the World Bank report, such decline will affect emerging economies, which are the greatest recipients of these inflows.
David Malpass, president of the World Bank Group, said remittances are a pivotal source of income for developing countries, yet, the ongoing economic recession caused by Covid-19 is taking a severe toll on the ability to send money home and makes it all the more vital that we shorten the time to recovery for advanced economies.
On the other hand, the report showed that the UN, through its Sustainable Development Goals (SDGs), aims to decrease the average cost of sending cash transfer to three percent by 2030, while the global average stood at 6.8 percent of the transaction value as of early 2020.
“Costs tend to vary based on market competition. It is therefore unsurprising that remittance commissions charged by operators in the Gulf are among the lowest, given that immigrants represent high proportions of their populations."
Saudi Arabia and the UAE are the largest exporters of remittances worldwide after the US, as 80 percent of UAE residents are foreign-born, as is over 80 percent of Saudi Arabia’s private sector workforce, according to the report.
“The UAE is already one of the cheapest countries in the world to send money from. The average commission charged on a transfer of Dh735 ($200) to India was 3.04 percent as of February, only slightly above the UN’s SDG target for 2030,” read the report.
In contrast to the UAE, sub-Saharan Africa has the world’s highest average transfer cost for remittances, which is at nine percent.
However, these costs have dropped significantly since 2008, when the average commission charged for sub-Saharan Africa transfers was 15 percent. They have, however, been reasonably stagnant since 2014, when the rate was 10 percent, according to the report.
The report attributed these high charges to the strict regulations that require money transfer operators to carry out checks to verify that the money is not destined for, or being used in, illicit practices, thus, streamlining regulations to reduce these checks would be one way to lower costs for consumers, who send small but regular amounts of money.
It also expected that increased competition in Africa would likely drive down prices.