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African immigrants sent home over $40 billion (N6 trillion) in
remittances last year, according to a new joint report by the World Bank and
African Development Bank. This figure is down from $41 billion in 2008 and just
over US$38 million in 2009, according to a similar report last year.

The report which cover remittances from OECD ( Organisation for
Economic Co-operation and Development comprising Eastern and Western Europe,
advanced Asian and South American economies) countries and transfers from other
African countries such as South Africa, also shows the pattern of disbursement
of these transfer of funds. “Data from household surveys reveal that households
receiving international remittances from OECD countries have been making
productive investments in land, housing, businesses, farm improvements,
agricultural equipment, and so on.” It added that many migrants transfer funds
to households in origin countries for the purpose of investment. Thirty six
percent in Burkina Faso, 55 percent in Kenya, 57 percent in Nigeria, 15 percent
in Senegal, and 20 percent in Uganda.

Investing significantly

According to the report, “households receiving transfers from
other African countries are also investing a significant share in business
activities, housing, and other investments in Kenya (47 percent), Nigeria (40
percent), Uganda (19.3 percent), and Burkina Faso (19.0 percent).” Education
was the second-highest use of remittances from outside Africa into Nigeria and
Uganda, the third highest into Burkina Faso, and the fourth highest into Kenya.

The report titled, ‘Leveraging Migration for Africa:
Remittances, Skills, and Investments’ added that the annual estimated saving,
usually held in foreign countries, by Africans exceeds $50 billion. “African
governments need to strengthen ties between Diaspora and home countries,
protect migrants, and expand competition in remittance markets,” said Dilip
Ratha, main author of the report and lead economist at the World Bank.
“Otherwise, the potential of migration for Africa remains largely untapped.”
The World Bank said African countries should begin to consider issuing Diaspora
bonds, which are sold by governments or private companies to nationals living
abroad, a concept that has been utilised in tapping into assets of Israeli and
Indian citizens living abroad.

The report estimates that Nigerian emigrants save about $3.5
billion annually, as at 2009, a figure which represents about 2 per cent of the
country’s gross domestic product. “Most of these savings are invested in the
host countries of the Diaspora. It is plausible that a fraction of these
savings could be attracted as investment in Africa if African countries
designed proper instruments and incentives,” the report added.

Diaspora bonds

According to Ratha¸ Sub-Saharan African countries can
potentially raise $5-$10 billion a year in Diaspora bonds. Countries with large
diasporas in high-income countries that can potentially issue its bonds include
Ethiopia, Ghana, Kenya, Liberia, Nigeria, Senegal, Uganda, and Zambia in
Sub-Saharan Africa and Egypt, Morocco, and Tunisia in North Africa.

“Diaspora bonds can be sold globally through national and
international banks and money transfer companies. They can be marketed through
churches, community groups, ethnic newspapers, stores, and hometown
associations in countries and cities where large numbers of migrants reside.”
Ronan McCaughey of the Laferty Group, a United Kingdom-based financial research
and advisory services firm, said remittances are important determinants of
growth in West African countries. ‘‘Especially in construction and real estate,
and are a major source of household income and financing,” he said in an email
response.