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Diaspora billions await harnessing.

Diaspora remittances to Africa amounting to tens of billions of dollars per year annually outstrip development aid and FDI--but only a small proportion of this goes into investment. Why?

Twenty years ago, the issue of diasporas and their involvement in the development of their countries of heritage barely registered on the political agenda. It was only after 2002, when the World Bank and IMF published figures demonstrating that diaspora remittances far outstripped Overseas Development Aid (ODA) that people began to notice.

Globally, we now know that 250m diasporans remit about half a trillion US dollars, each impacting on average 4.5 people (i.e. over a billion people) in their country of heritage, thus making them the foremost contributors to development. Of this, over $85bn per year is sent solely by the African diaspora.

Nevertheless, as recently as 10 years ago, it was an uphill struggle convincing African governments to create structures to engage their foremost contributors to development, whether through investment or skills transfer programmes.

Fast-forward to 2018 and most governments have created diaspora departments, offices, special representatives, or commissions. At the continental level, the AU describes the diaspora as its sixth region and is busily establishing frameworks to harness diaspora skills and talents, as well as financial resources, with the creation of a Diaspora Investment Fund, launched in December.

The second Nigeria Diaspora Investment Summit (NDIS), held in Abuja in November 2019, exposed why creating such structures is so vital, as well as the difficulties that continue to beset the best endeavours. The Summit attracted significant official support, with appearances by Vice-President Yemi Osinbajo, and the chair of the Nigerians in the Diaspora Commission that is set to work alongside the Foreign Ministry, who laid out the investment opportunities to the 200 assembled diaspora investors and their partners.

For the Nigerians, the issue of diaspora investment is particularly pressing. As other FDI flows decline (falling 40% from $9.64bn in 2015 to $5.12bn in 2016, and to $3.5bn in 2017), Diaspora Direct Investment (DDI) has been increasing.

Remittances to Nigeria sent through formal channels amounted to $22bn in 2018, and were probably as high as $32bn if those sent through informal channels are included. The World Bank has estimated that 25% of these remittances represent investment of some kind. DDI thus accounts for between $5.5-$8bn, which compares favourably with the declining FDI figures.

Also, the overall remittance figures of between $22-$32bn compare favourably with the federal government's budget of around $20bn. And these remittances tend to be counter-cyclical, increasing in times of natural and politico-economic catastrophes, when FDI heads for the doors, as well as without incurring the other outflows typical of ODA and FDI such as interest, debt and dividend payments, and the repatriation of funds to pay for expatriate professionals.

A question of trust

The diaspora is thus sustainably committed. So why has it been so difficult to leverage their resources for large-scale strategic investments, rather than the small-scale peer-to-peer investments to relatives and house-building that remittances so often represent? The issue is first, establishing an enabling environment that facilitates diaspora investment and second, creating viable investment and financial products and instruments, such as diaspora bonds, that people can access.

Trust, however, appears to underwrite these two factors--trust in the government that creates the enabling environment, and trust in the financial institutions that market the investment products.

And as someone remarked, trust arrives in a donkey cart, but flees in a Ferrari. A point perfectly captured at a London Ghanaian meeting requesting diaspora donations to re--equip a local hospital. Many wanted to give, but after working two jobs, feared their donation would instead end up in a politician-controlled Swiss bank account.

The diaspora is a product of migration, both voluntary and involuntary, and represents a huge resource, given the skills and knowledge that have been lost to Africa as part of these migratory flows.

With its rising population, Africa is also likely to remain a net exporter of labour, in which case migration will continue, with the diaspora remaining an important force. Creating structures and bridging the trust deficit between governments and the diaspora will unleash massive dividends.
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Title Annotation:BACK TO THE FUTURE
Author:Wambu, Onyekachi
Publication:New African
Geographic Code:60AFR
Date:Dec 1, 2019
Previous Article:The unseen pictures of Idi Amin.

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