The average cost of sending $200 remittance into the Sub-Saharan Africa region increased from 7.4% in 2022 to 7.9% in 2023 according to latest report from the World Bank.
The bank stated this in its report on migration and development mainly in Lower- and Middle-Income Countries (LIMC) in 2024 where it stated that remittance inflow into the SSA region declined by 0.3% in 2023 but is projected to reverse the trend to grow by 1.5% this year.
According to the world bank cost of sending remittance into Africa remains the highest in the world and the cost of sending remittances within some Africa countries reached as high as 33% for $200 in 2023. The global average cost of sending $200 remittance in 2023 stood at 6.4% in low and middles income countries with the cheapest being South Asia at 5.4%.
The report states, “Sub-Saharan Africa remains the region with the highest remittance costs. Senders had to pay an average of 7.9 percent to send $200 to African countries during 2023Q4, compared with 7.4 percent in 2022Q4.”
“Costs vary substantially across the region, ranging from 2.1–4.0 percent in the lowest-cost corridors to 18–36 percent in the highest. Intraregional remittances costs are still very high. For example, sending $200 in remittances from Tanzania to neighboring Kenya, Uganda, and Rwanda cost a migrant more than 33 percent in 2023Q4.”
The United Nations (U.N) projects to reduce the cost of sending $200 remittances to around 3% by 2030 in a bid to maximise the returns to households and beneficiaries.
Migration can benefit low- and middle-income countries, as remittances boost consumption and reduce poverty in developing nations. However, the high cost of transferring remittances, especially to sub-Saharan Africa, diminishes these benefits for migrants.
Since 2019, remittances have continued to trump Foreign Direct Investment (FDIs) in low and middle income countries and in 2023, remittances inflow into the SSA region was 1.5 times FDI inflow into the region.
Problems projected to affect remittance inflow Africa in 2024
Furthermore, the bank noted that risks to remittance inflow into the SSA in 2024 include; lower growth in developed economies- the source of remittances, escalation in conflict between Isreal and Hamas, security risks in the Sahel (Chad, Mozambique, and Mali) down to Nigeria and climate problem mainly drought in Southern Africa.
The report shows that Nigeria received about $19.5 billion in remittances last year, the highest in the region, making up around 35% of the total inflow into Sub-Saharan Africa. Ghana and Kenya also received significant amounts, with $4.6 billion and $4.2 billion, respectively.
At the lower end of the remittances table are Sudan and South Africa, each with $1 billion in remittances. Additionally, the report highlights that remittances make up one-fifth of the GDP in countries like Gambia, Lesotho, Comoros, Liberia, and Cabo Verde, which rely heavily on these funds for economic growth.
What you should know
The risks highlighted by the global lender are realistic and already at play so far in the year. The Isreal-Hamas conflict has lingered into the second half of the year while Houthi rebels in the Red Sea are disrupting supply chains and increasing freight time.
However, the bright spot, the Eurozone economy beat expectations in the first quarter of 2024 growing by 0.3% by quarter and 0.5% year-on-year – the strongest performance since the energy crisis began in 2022.
