African economies hit by decline in remittances amid global economic pressures

Despite this reduction, remittances remain a critical source of foreign exchange for the region, amounting to 1.5 times the volume of foreign direct investment.

The report further indicated that Nigeria continued to be the largest recipient of remittances in the region, although its inflows fell by 2.9% over the year. The cost of sending remittances to Sub-Saharan Africa remains the highest globally, averaging nearly 8% for every $200 sent. 

This is significantly above the global average of 6.4%. The most expensive remittance routes include transfers from Tanzania to neighbouring East African countries Uganda, Kenya, and Rwanda, where fees can exceed 30% per $200 transaction. On the other hand, sending money to Mali from Senegal and Côte d’Ivoire remains among the cheapest options.

The decline in remittance inflows has become a challenge for many African countries, as remittances have been crucial in supporting their economies amidst issues such as food insecurity, drought, supply chain disruptions, floods, and debt-servicing difficulties. Countries that are particularly dependent on remittances include the Gambia, Lesotho, Comoros, Liberia, and Cabo Verde. The World Bank projects a 1.5% growth in remittance flows to the region in 2024.

Meanwhile, remittance inflows to the Middle East and North Africa region fell by 15% in 2023, totalling $55 billion. This sharp decline was primarily due to a drop in remittances to Egypt, caused by the divergence between official and parallel foreign exchange rates, which likely diverted funds to unofficial channels. However, after Egypt unified its exchange rates in March 2024, official remittance flows began to recover. Remittances to this region are expected to grow by 4.3% in 2024.

The World Bank highlighted several factors that influenced remittance flows in 2023, including job markets for migrant workers, immigration policies, exchange rate fluctuations, and ongoing conflicts. Looking ahead, the growth in remittances projected for 2024 is expected to be driven by steady economic growth and stable labour markets in major migrant-hosting countries, particularly the United States and Europe. However, potential downside risks, such as worsening conflicts, volatile oil prices, and economic downturns in high-income countries, could impact these projections.

Remittances, typically recognised as the money or goods that migrants send to their families and friends in their home countries, are often the most tangible and widely recognised connection between migration and development.