To stop the tradition of billions of dollars in remittances from Nigerians in the diaspora going into burials, birthday parties and other ceremonies, experts take a look at how to harness these funds for developmental purposes, but there is strong opposition to government involvement. Oluwakemi Abimbola reports
‘Never!’ was the response from a new member of the ‘Japa’ trend, Dunni Adegbite, when asked if she would be willing to put her money into an investment fund in Nigeria. She said she had decided to distance herself from Nigeria.
However, it was for folks like her that in January 2022, the President, Major General Muhammadu Buhari (retd.) okayed the establishment of a Nigerian Diaspora Investment Trust Fund, which is a private sector investment window to enable Nigerians in the diaspora to support direct investments in the country.
Buhari gave his endorsement at the presentation of a compendium entitled +600 Diaspora Icons @60, published by the Nigerians in Diaspora Commission.
At the presentation, Buhari noted the foreign exchange remittances by Nigerians in the diaspora will go a long way to help families and enhance the development index in Nigeria.
In May 2022, NiDCOM revealed that the Africa Development Bank had agreed to partner on many areas of diaspora development in Africa including the Diaspora Investment Fund.
The Chairman/CEO of NiDCOM, Abike Dabiri-Erewa, had led a delegation to meet the Director General, Nigeria Country Office, AfDB, Lamin Barrow, where she sought the continental body’s partnership on the National Diaspora Trust Investment Fund.
Meanwhile, Buhari at a presidential town hall meeting he held with Nigerians in the diaspora in December in Washington revealed that “in 2021, our diaspora home remittances through official channels stood at 20bn dollars which is four times more than the value of our Foreign Direct Investment”.
According to the World Bank November 2022 report titled ‘Remittances Brave Global Headwinds Special Focus: Climate Migration,’ foreign remittance into Nigeria was estimated to hit $20.9bn at the end 2022, compared to $19.5bn in remittances inflow recorded in 2021. This represented a 7.5 per cent rise from the prior year.
Nigeria’s remittance inflows have averaged $21bn since 2014 with $24.3bn and $17.2bn as the highest and lowest recorded in 2018 and 2020 respectively.
The report also noted that the largest recipients of remittances in Sub-Saharan Africa during 2022 included Nigeria, Ghana, Kenya, and Senegal. Nigeria is also included among the top 10 recipients of remittances globally.
In February 2023, a report from the World Economic Forum revealed that Nigeria got $21bn in remittances in 2022 out of the global remittance which stood at $794bn.
Diaspora-related investment funds are not exactly new on the African continent, as Ethiopia, Egypt, Kenya and Nigeria have issued diaspora bonds in the last two decades. However, the bonds relatively underperformed due to low investor interest.
Pointing out some of the reasons for the low performance of the bonds, a nonprofit public policy organisation based in Washington, DC., Brookings Institution, in a piece titled ‘Diaspora bonds: an innovative source of financing?’, said: “The risk of defaulting on diaspora bonds, volatility in the African financial markets due to over-reliance on commodities (such as oil in Nigeria), and lack of transparency and confidence in domestic financial markets have decreased diaspora interest in these instruments.”
At the African Development Bank Forum in December, stakeholders put the total remittance into Africa at $95.6bn in 2021 and expressed a belief that the remittance, skills and expertise of Africans in the diaspora have assumed greater importance to Africa’s prospects in light of dwindling foreign investment inflows.
The forum argued that securitised remittances would offer African governments robust investment collateral and a source of financing through bond issuance. In addition to remittances, Africans overseas represent a source of much-needed direct investment, expertise and skills that can be transferred to businesses and workers in their home countries.
The AFDB President, Dr Akinwumi Adesina, said that Africans overseas had become the largest financier of the continent via their remittances and that it needed to be harnessed.
“The African diaspora has become the largest financier of Africa! And it is not debt; it is 100 per cent gifts or grants, a new form of concessional financing that is the key for livelihood security for millions of Africans,” he said.
In contrast to the high level of remittance flows in 2021, official development assistance to Africa in 2021 stood at $35bn.
Adesina added, “Because the flow of remittances to Africa is high, rising, and stable, it offers huge opportunities to serve as collateral to secure financing for African economies. African countries should securitise remittances to promote investments, especially for infrastructure on the continent.”
The African Union also has the African Diaspora Investment Fund which was adopted by AU Heads of State at the Global African Diaspora Summit in 2012 in Midland, South Africa. The AU said that the mission of ADIF was to mobilise diaspora funds for structured profitable investment in socially responsible and impactful ventures and schemes.
A consensus about the management of the fund was that it should not be left in the hands of the government, mostly due to the trust deficit between the government and its citizenry.
Speaking, Chief Economist, KPMG Nigeria, Dr Yemi Kale said that remittances from Nigerians abroad were usually for specific purposes and to move Nigerians to put their monies in an investment fund, then perhaps, there would be a need to offer incentives and solve foreign exchange challenges that could erode the value of such investments.
He said, “There is a purpose for every remittance. For instance, the man or woman sending money from the US, the UK, or wherever is doing so for a purpose. He is either doing it to support his family, maybe he wants to buy a house or pay for a burial. You can’t actually stop him from doing that because that is what he wants to do with his money. You can’t tell him those things don’t make sense if you believe they don’t. They make sense to him.
“A way to get people to invest in the fund will not be to divert whatever they believe they want to use their funds for into the (investment) fund. (It will be) more of an attempt to encourage them. So, you want to send money to your brother, or sister, you can go ahead and do that but add some additional money into this fund.”
The Chief Economic Adviser to the Imo State Governor, Professor Kenneth Amaeshi, who is also the Director of the Sustainable Business Initiative at the University of Edinburgh Business School, reiterated that diaspora remittances were enough to meet the developmental needs of the country if harnessed.
“When we talk about diaspora investment, we hear a lot about the amount of money coming into Nigeria and I wonder how those investments can be properly channelled towards solving our developmental challenges. The money is coming into families in a very random fashion but we can track them. The question for me is how can we realise opportunities embedded in these funds,” he said.
Looking at the issue of the investment fund from the perspective of the capital market, the Managing Director of Afrinvest Consulting, Abiodun Keripe, stated that low investor interest was still a major challenge driven by a lack of clarity about the fund and low trust in government by Nigerians in the diaspora.
He, however, stated that the exchanges in the Nigerian capital market; Nigerian Exchange Limited, the NASD OTC Securities Exchange and the FMDQ, were well positioned to harness the benefits inherent in diaspora remittance.
He said, “There is a need to have an institutionalised process to set up the fund, the necessary data need to be available before you proceed. The Nigerian Exchange Limited, the NASD OTC Exchange and FMDQ OTC Exchange have been set up to provide open trading platforms for government to rely on in setting up the fund. These platforms can help in aggregating and accessing diasporans’ KYC data. You need to have a platform where they (Nigerians in the diaspora) can fund and exit whenever they choose to.
“Away from the patriotic theme, having these structures in place is very critical. There are risks cutting across political and security, currency and foreign exchange, legislative and regulatory risks and a lack of confidence in the government’s ability to guarantee the investment. These are risks that need to be talked about and some mitigants put in place to provide the diasporans necessary comfort to put their monies in the fund.”
In addition, the chief economic adviser for Imo State, Amaeshi, said that the continuity and sustainability of the fund were very important, as well as localising the focus of the fund in a bid to take advantage of the sense of patriotism in Nigerians who are in diaspora.
“Let’s be realistic. If my money is coming into Nigeria, I will be more interested in it doing something for himself in my home state. If I have a product framed around that, it might be more compelling. The sense of patriotism is very much localised.
“In this case, I will be very reluctant to hand over to the government. Our government are very peculiar but I will say the government can be co-investors if they want to. The private sector should start it. It is all about getting the appropriate licenses and such.”
Toeing a similar path, Dr Kale said the fund should not have government involvement as it would discourage the involvement of Nigerians.
“This should not be something that is managed by government. Government is not necessarily the best fund manager. That being said, I think the Sovereign Wealth Fund has done very well. If we are trying to get Nigerians in diaspora, for whatever reasons who don’t trust the government’s ability to hold and to manage funds, I think first, it should be run by experienced fund managers in Nigeria.”
Stakeholders also pointed out technology can help to make the management of the diaspora investment fund transparent; a key concern of potential investors.
“Make it as transparent as possible; data-driven. If I’m in the US, UK, Cameroon or wherever, I want to be able to access my account, just the same way we access our bank accounts and individual accounts in investment houses in Nigeria. You can access your account, you can top up your investment in addition to requesting the liquidation of your investment,” Kale said.
