President Muhammadu Buhari recently presented a total expenditure of N8.83 trillion in 2019 Budget Proposal tagged "Budget of Continuity" to the National Assembly.
Nigeria tops remittances to sub-Saharan Africa with $22 billion according to the World Bank and it is clear that Nigeria's Diaspora remittances for 2017 can fund our budget and pay part of Nigeria's foreign debt for 20 years. Nigeria needs a Diaspora bond of at least half of the 2017 remittances to execute capital projects. The revelation is that Diaspora remittances can help shape Nigeria's debt in the 21st century. We can create more Diaspora bonds where remittances could be used to fund capital projects. Diaspora fund can cover what Nigeria struggles to borrow in 20 years. The interest for servicing foreign debt will be channeled to Diaspora bond. The International Monetary Fund, IMF, should stop criticising our external debt since the 2017 Diaspora remittances can pay Nigeria's external debt for 20 years.
I want to appeal to President Buhari to create more Diaspora bonds which will help grow Nigeria's economy. There is therefore the scope for the Federal and state governments through community associations or even faith groups in the Diaspora, to make a developmental impact with innovative policies. Annual remittances are running to about $22 billion, about three-quarters of total spending in the 2018 budget. There is a stable inflow, unlike portfolio investment or even development assistance.
On June 19, 2016 Nigeria successfully issued its first Diaspora bonds in the International Capital Market to raise the sum of USD300 million at the rate of 5.625% for a period of five years. This feat made Nigeria the first African country to issue a bond targeted at retail investors in the United States, a market highly regulated by the United States Securities and Exchange Commission (U.S. SEC). The only previous U.S. SEC registration for an African country was targeted at institutional investors. Let's create more Diaspora bonds to grow our economy.
Sovereign debt instruments traded in the home or destination country is a diaspora bond. They are traditional bonds sold by the home country to its own diaspora as an alternative to borrowing from capital markets. The first diaspora bonds were issued by China and Japan in the 1930s; Israel and India entered the market in the 1950s; while in the 2000s Ethiopia, Nigeria and Ghana were the first in Africa to do so. Diaspora bonds do not need to be limited to diaspora investors. Proceeds can be used to finance major public sector projects including energy, housing, and other economic infrastructure.
According to a The World Bank report, remittances to low and middle-income countries rose by 8.5 percent from $429 billion in 2016 to $466 billion in 2017 while global remittances appreciated by 7.0 percent to $613 billion in 2017, from $573 billion in 2016. The rebound in remittances, the World Bank said was driven by growth in Europe, the Russian Federation, and the United States. It stated: "Remittances to low- and middle-income countries rebounded to a record level in 2017 after two consecutive years of decline."
Global remittances, which include flows to high-income countries, grew 7.0 percent to $613 billion in 2017, from $573 billion in 2016. "The stronger than expected recovery in remittances is driven by growth in Europe, the Russian Federation, and the United States. The rebound in remittances, when valued in U.S. dollars, was helped by higher oil prices and a strengthening of the euro and ruble." According to the statement, globally, India emerged top remittance recipients with $69 billion, followed by China ($64 billion), the Philippines ($33 billion), Mexico ($31 billion), Nigeria ($22 billion), and Egypt ($20 billion).
Remittances represent household income from foreign economies, mainly from the temporary or permanent residents in other countries, popularly called the Diaspora. But the remittance of this disposable income back home has emerged a novel fallout of the 21st century, given the increasing significance. International experience suggests that remittance flows have implications for macroeconomic and financial stability, hence accurate compilation and recording, as well as new trends and innovations in remittance corridors are crucial in understanding the dynamics of the market.
Remittances are private unrequited transfers (i.e. payments for which no economic asset or benefit is obtained) sent from abroad to families and communities in a worker's country of origin (or home country). In the absence of social protection systems, remittances are mostly used by households for everyday consumption purposes and access to basic services such as health, education, and housing. They also may be a vital source of income for people whose livelihoods are threatened by natural disasters or other calamities.
Remittances remain important sources of donations to those beyond the immediate family circle through formal or informal philanthropic initiatives. However, when they are not used for immediate consumption needs or passed on to charities, the savings and remittances of those living in the Diaspora can be turned into investments. They can offer governments and companies an additional means to finance infrastructure and business operations, while rewarding senders (i.e. migrant workers) with a financial return. While remittances cannot be (and should not be) equated with other international financial flows, such as FDI, export receipts or ODA, the Addis Ababa Action Agenda of the Third International Conference on Financing for Development recognises the positive contribution they can make.
The desire of Diasporas to assist those people who have remained in their homelands can be turned into a driver for much needed savings and investments in the countries of origin. Countries that have understood this potential have established legal frameworks to facilitate diaspora investments, including through the issuance of debt instruments and the establishment of intermediary agencies.
*Mr. Donald, a public affairs analyst, wrote from Benin City, Edo State.