Over the years, Nigeria has suffered vicissitudes related to balance of payments (BoP), the details of a country’s financial and economic interaction with the rest of the world.
A country’s balance of payments is an important indicator of its health, alongside its gross domestic product, as it is the ultimate guide to its international economic relations.
The BoP accounts for all the trade that flows into and out of a country, including money injected into it from overseas or, for instance sent out to families and business counterparts living in other countries.
The BoP shows whether a country is borrowing or overextending itself over a period of time, potentially storing up trouble for the future, or lending out cash to others in exchange for goods. The BoP also reveals whether a country has a prosperous future ahead of it, or whether it might have to seek help from lenders.
Balance of payments is made up of two parts: current and capita accounts. The current account measures inflows and outflows of goods and services, including the trade of physical goods and invisible trade such as advertising, legal advice, hospitality, etc. The capital account, on the other hand, measures such activities as investments in or from other countries.
If a country imports significantly more goods and services than it exports, it will have a large current account deficit.
Many economists express worry when figures are released from the Central Bank of Nigeria showing that the country’s BoP is negative, but a country’s balance of payments must balance. Goods, services, and resources traded internationally are paid for; thus, every movement of products is offset by a balancing movement of money or some other financial asset.
Since a nation pays for its imports with exports, Nigeria suffers expected current account deficit. The country’s export products are mainly agricultural and petroleum products and cannot generate the money needed to create an equilibrium in the balance of payment. The situation is being exacerbated with the price of crude oil, Nigeria’s major export suffering topsy turvy movement since the real advent (global) of the novel coronavirus since 2020 and counting.
However, Nigeria’s current trade account does not tell the whole BoP story. Trade deficit for Nigeria may not necessarily be bad any more than trade surplus is good.
Nigeria’s growing remittance payments is filling the gap so adequately that it may dictate wisdom for the federal government to facilitate and lubricate easier remittance systems, probably by floating a Diaspora remittance bank.
Just before the advent of the real COVID-19, Nigeria was getting roughly $25 billion annually from remittance payments. That constitutes roughly 6 percent of the country’s GDP, and 11 billion less what Nigeria budgeted for her 2021 fiscal expenditure. Nigeria’s receipt of Diaspora remittances accounts for roughly 67% of remittances to West Africa.
It is important to stress also, that the figure is accreting on a yearly basis.
The reason is not farfetched. Nigeria’s knowledge-based workforce is among the most competent, not just in Africa, but the world at large.
A National Bureau of Statistics (NBS) report says remittances from Nigerians in the Diaspora rose from $3.24 billion in 2013 to approximately $25.08 billion in 2018. It is plausible, then, that over the last 6 years, Nigerians in Diaspora sent almost $100 billion to the country.
And it doesn’t end there. PricewaterhouseCoopers (PWC) forecasts that the total remittance inflow to Nigeria will grow from its current $25.08 billion to US$34.89 billion in 2023.
It is estimated that 17 million Nigerians live abroad. Of the 17 million, it is estimated that 4 million of them are students, an indication that Nigeria’s Diaspora population will continue to rise in tandem with remittances.
With the current trend, it is arguable that contrary to concerns about brain drain on the Nigerian economy, Nigerians out there are contributing to this economy in a way that they may be benefitting this economy more than if they were jobless at home.
Diaspora remittances is one area government may need to oil, even as those funds contribute to nation building.
A diaspora bank may be one of the most viable Nigeria may ever have.