By Agnes Gitau
Financing Africa’s public and private sector projects has always been an expensive business, the outbreak of COVID 19 has caused a tremendous strain on access to finance, in an already stretched environment, in particular frontier African States.
As leaders explore solutions for Africa’s recovery, the importance of new-thinking, creativity particularly in sustainable financing for all Africa’s development projects, has become a priority for all stakeholders. It is therefore imperative for governments and institutions to creatively tap into the Diaspora remittances, towards critical sectors that require financing the most.
Africa’s diaspora contributes at least $48 billion to the continent’s gross domestic product — significantly more than the $47 billion that Africa receives from foreign direct investment and the $50 billion it receives in aid. These funds play an important role in supporting everyday costs, and unlike foreign aid and FDI, diaspora remittance goes directly to where it is needed most and directly to households for domestic purposes: ranging from food and school fees for siblings to health care for relatives and new homes for ageing parents.
In addition, Diaspora investments are also a veritable source of investment capital into sectors that are chosen by the diaspora. In contrast to foreign direct investments or Eurobond and other overseas borrowing, Diaspora investments come at no cost or charge to the recipient countries, and what’s is more important the funds focused on local production, services, etc that generate jobs locally, boost local knowledge, increase government revenue and help reduce the country’s volume of imports.
The funds are less likely to be misspent as compared to the misappropriations and legendary inefficiencies in the foreign aid industry. Diaspora remittance funds, as gifts of love, are better focused on building the family and hence the nation. The distribution of these Diaspora remittance funds is far more efficient than ODA funds since these monies go directly to paying school fees, building houses and growing businesses.
Kenya has been ranked 3rd in Africa in terms of diaspora remittance inflows, projected to reach US$ 2.9 Billion this year after Nigeria and Egypt.
In the month of February 2021, Kenyans in the Diaspora despite the challenges of COVID 19 in the developed economies sent home $260.2 , this is 19% more than the $219 million than last year according to the latest data by Central Bank of Kenya. The rise in diaspora remittance can be attributed to demands from home, Kenyans have been greatly affected by the pandemic and those who are lucky can call on their relatives for support. In a snap survey of around 1000 Kenyans by GBS Africa, the demand for diaspora to support relatives meet healthcare bills has risen in the past one year, this could be linked to Covid 19 impact.
As much as remittance contributes to development, a discussion on how prevent it from creating a dependancy cycle similar to what Africa has experienced from foreign aid must be heard.
In the 12 months to February 2021, the cumulative inflows rose to $3.155 billion, an 11.4% increase from $2.831 billion in the 12 months to February 2020.
Nigeria is the 2nd largest source of diaspora remittance in Africa after Egypt. Over 1 million Nigerians abroad send home $24 Billion annually to support their families, this is equivalent to (6.1%) of Nigeria’s GDP. The remittance is 7 times more than annual foreign aid and 11 times more than the Foreign Direct Investment to the country (PwC Report). Nigeria Diaspora remittance if channeled and reinvested wisely, could add value and contribute to development in Nigeria as well as address the Forex crisis
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