Remittances to sub-Saharan Africa declined by an estimated 12.5% in 2020 to US$42 billion, the World Bank’s 2021 Migration and Development report has said.
The decline was almost entirely due to a 27.7% decline in remittance flows to Nigeria, which alone accounted for over 40% of remittance flows to the region.
Excluding Nigeria, remittance flows to Sub-Saharan African increased by 2.3%. Remittance growth was reported in Zambia (37%), Mozambique (16%), Kenya (9%) and Ghana (5%).
In 2021, remittance flows to the region are projected to rise by 2.6%, supported by improving prospects for growth in high-income countries.
Data on remittance flows to sub-Saharan Africa are sparse and of uneven quality, with some countries still using the outdated Fourth IMF Balance of Payments Manual rather than the Sixth, while several other countries do not report data at all.
High-frequency phone surveys in some countries reported decreases in remittances for a large percentage of households even while recorded remittances reported by official sources report increases in flows.
The shift from informal to formal channels due to the closure of borders explains in part the increase in the volume of remittances recorded by central banks.
Remittance costs
Sub-Saharan Africa remains the most expensive region to send money to, where sending US$200 costs an average of 8.2% in the fourth quarter of 2020.
Within the region, which experiences high intra-regional migration, it is expensive to send money from South Africa to Botswana (19.6%), Zimbabwe (14%), and to Malawi (16%).
According to the report, despite COVID-19, remittance flows remained resilient in 2020, registering a smaller decline than previously projected.
Officially recorded remittance flows to low- and middle-income countries reached $540 billion in 2020, just 1.6% below the 2019 total of US$548 billion.
The decline in recorded remittance flows in 2020 was smaller than the one during the 2009 global financial crisis (4.8%).
It was also far lower than the fall in foreign direct investment (FDI) flows to low- and middle-income countries, which, excluding flows to China, fell by over 30 percent in 2020. As a result, remittance flows to low- and middle-income countries surpassed the sum of FDI (US$259 billion) and overseas development assistance (US$179 billion) in 2020.
The main drivers for the steady flow included fiscal stimulus that resulted in better-than-expected economic conditions in host countries, a shift in flows from cash to digital and from informal to formal channels, and cyclical movements in oil prices and currency exchange rates.
The true size of remittances, which includes formal and informal flows, is believed to be larger than officially reported data, though the extent of the impact of COVID-19 on informal flows is unclear.
“As COVID-19 still devastates families around the world, remittances continue to provide a critical lifeline for the poor and vulnerable,” said Michal Rutkowski, global director of the Social Protection and Jobs Global Practice at the World Bank.
“Supportive policy responses, together with national social protection systems, should continue to be inclusive of all communities, including migrants,” he added.
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