‘How Diaspora bonds can fetch Nigeria, others $10b yearly’

[TGD]

 NIGERIA and other sub-Saharan African countries can raise between $5 and  $10 billion yearly through the Diaspora bonds , according to a new report jointly put together by the World Bank and the African Development Bank.

Recorded remittances into Africa, which grew four-fold between 1990 and 2010 to reach nearly $40 billion in 2010, are the continent's largest source of foreign capital after foreign direct investments.

The report, "Leveraging Migration for Africa: Remittances, Skills, and Investments," a collection of data from new surveys, made available to The Guardian yesterday by the World Bank country office in Abuja also finds evidence strongly confirming that migration and remittances reduce poverty in communities as remittances lead to increased investments in health, education, and housing in Africa. Africans in the Diaspora also provide capital, trade, knowledge, and technology transfers.

Stressing the need for African governments to strengthen ties between Diasporas and home countries, protect migrants, and expand competition in remittance markets, lead economist at the World Bank and main author of the report warned that if this did not happen in good time "the potential of migration for Africa remains largely untapped."

According to the report, the Diaspora  bonds  which are sold by governments or private companies to nationals living abroad have already been successful in tapping into assets of Israeli and Indian citizens living abroad.

The report was specific on target: "Sub-Saharan African countries can potentially raise $5–$10 billion a year in Diaspora bonds. Countries with large Diasporas in high-income countries that can potentially issue Diaspora bonds

include Ethiopia, Ghana, Kenya, Liberia, Nigeria, Senegal, Uganda, and Zambia in Sub-Saharan Africa and Egypt, Morocco, and Tunisia in North Africa."

It went further: "With about 30 million Africans living outside their home countries, migration is a vital lifeline for the continent. Yet African governments need to do more to realize the full economic benefits of the phenomenon, says a new report by the African Development Bank and the World Bank."

"Migration pressures will only rise in the future as a result of demographic changes of rising population in Africa and falling labour forces in Europe and many developed countries...Therefore, adapting policy responses to demographic forces and crafting multilateral arrangements for managing future migration is essential," the report added.

It revealed that two-thirds of migrants from Sub-Saharan Africa, particularly poorer migrants, go to other countries in the region, while more than 90 per cent of migrants from North Africa have moved outside the African continent. The top destinations for African migrants are France (nine per cent of total emigrants), Cote d'Ivoire (eight per cent), South Africa (six per cent), Saudi Arabia (five per cent), and the United States and the United Kingdom (four per cent each).

Confirming the findings, Shantayanan Devarajan, chief economist of the Africa region at the World Bank, said: "Migration of skilled labour is particularly high in small and low-income African countries, which already have

low levels of human capital. Fragile and post-war countries face even bigger challenges because of the flight of human capital. African governments and policy makers should focus on increasing education and skill levels and establishing an environment in which high-skilled workers have productive opportunities at home."

Strengthening its basic position, the report advised that "African banks can improve their access to international capital markets by issuing bonds that are securitised by future remittance inflows."

In this regard, the Chief Economist of the African Development Bank, Mthuli Ncube, noted : "The African Development Bank, the World Bank and bilateral

donors can play a significant role in facilitating remittance securitization and mitigating the risks to African countries of issuing these remittance-backed bonds. Efforts can include technical assistance in project design and

creditworthiness analysis, prudential debt management, and helping African countries obtain sovereign ratings."

Other relevant statistics captured in the report include recent surveys showing that investments such as land purchases, building a home, and starting a business were the highest uses of remittances sent home by African Diaspora. As a share of total investment, these represented 36 per cent in Burkina Faso, 55 per cent in Kenya, 57 per  cent in Nigeria, 15 per cent in Senegal, and 20 per       cent in Uganda.

Education was the second-highest use of remittances from outside Africa into Nigeria and Uganda, the third highest into Burkina Faso, and the fourth highest into Kenya.

However, official remittance flows to Africa are significantly underestimated, with only about half of the countries in Sub-Saharan Africa collecting and

reporting remittance data with any regularity. The report finds it is still very expensive to send remittances to African countries, particularly within Africa. These high costs encourage the use of informal channels and are an unnecessary burden for African migrants and remittance recipients.

The report recommends that post offices, savings and credit cooperatives, rural banks, and microfinance institutions that have large branch networks can play an

important role to expand access to remittances and financial services among the poor and in rural areas.



Source: 'How Diaspora bonds can fetch Nigeria, others $10b yearly'