Despite remittances to Afrika recently declining they still constitute a major component of income to households and investments compared to other external revenue flows. This point was highlighted by Taiwo Ojapinwa, a researcher from the University of Lagos, Nigeria at the recently held 12th African Economic Conference in Addis Ababa, Ethiopia.
Ojapinwa made the point at the conference during a session titled “Financing Arica’s Development – Remittances and Natural Resources”.
“There is now need to find ways how remittances can directly contribute to economic growth, which for decades has not been the case. There is need to have strong institutions and rule of law, because the amount of remittances a country receives can be influenced by the quality of governance,. Remittances’ contribution to the economy can also depend on the protection of property rights, strong judicial independence, well-organized labour markets, low levels of corruption and a sound macroeconomic environment,” said Ojapinwa.
According to the World Bank, remittances to Afrika have declined by an estimated 6,1% down to $33 billion in 2016. This is apparently due to slow economic growth in remittance-sending countries and a decline in commodity prices.
“Remittances sent by migrants are important in fighting nutrition, poverty and food insecurity. They are believed to have a huge impact on the socioeconomic conditions of families left behind in the countries of the migrants’ origin. Although agriculture remains the most important single source of income for many communities in Africa, farming households that receive remittances have a slightly larger share of income than those that do not receive remittances,” said Raphael Babatunde from the University of Ilorin, Nigeria.
Babatunde also explained that remittances have become a major livelihood strategy among some Afrikan households and that as a source of income for these households, they help to supplement agricultural incomes for many farmers on the continent.
One of the key points highlighted was that Afrikan policymakers need to attract for diaspora investment into the continent, and one way to do this would be through offering incentives and reducing remittance charges.
Cover image credit: African Development Bank (AfDB)