Nigerians in foreign countries are known to be the most educated individuals who send money to Nigeria regularly to support their families. Foreign revenue helps Nigeria’s governmental debt, at 25% of GDP, is quite manageable. However, debt service obligations are substantial, and macroeconomic imbalances and policy uncertainties impair the country’s capacity to attract external private financial flows. Nigeria got $7.1 billion in foreign investment in the first half of 2020. This was half of what it had accumulated in the previous year’s similar time.
Nigeria’s financial needs necessitate more domestic revenue collection. Non-oil revenue collections currently account for 4% of total GDP. Because of the slowing economy, the revenue yield from raising the value-added tax rate to 7.5 percent from 5 percent in 2020 was lower than expected. Online money transfers to Nigeria by expatriates were the only source of foreign revenue in the country during the lockdown.
Why Is Remittance The Biggest Source Of Foreign Revenue During The Difficult Time Of The Pandemic?
Remittances (Expatriates money transfer to Nigeria from abroad) and sharia-compliant Sukuk bonds are additional sources of funding. Remittances totaled $23.8 billion (5.3 percent of GDP) in 2019, although the impact of the COVID–19 pandemic in essential source markets could lower that figure. In June 2020, the third sale of 150 billion nairas ($395 million) Sukuk bonds generated 669.1 billion nairas, with 162.5 billion nairas going to 44 vital road projects. Lower oil receipts, the principal source of foreign exchange, limit foreign reserves as a financing option in the medium term.
What Are The Chances Of Growth In The Economy Of Africa Biggest Economies?
The economy grew little in the fourth quarter of last year, with GDP increasing by 0.1 percent year over year. The figure was up from the third quarter’s 3.6 percent drop and outperformed market estimates of a 1.9 percent drop. In terms of the year as a whole, Nigeria’s economy shrank by 1.9 percent from the previous year, marking the country’s first recession since 2016 and the most considerable decrease in at least three decades. The worldwide health crisis and the ensuing containment measures taken at home and abroad had a significant impact on activities.
Economic growth is likely to pick up this year, as Africa’s largest economy recovers from the Covid-19-induced downturn. The progressive relaxation of restrictive measures at home and abroad should stimulate domestic and external demand and the oil sector since the demand for the commodity rises as road traffic increases and trade levels improve. Expatriates are now more confident to send money to Nigeria online, which is also a positive sign of recovering the economy.