In the last decade, the paradigm of Migration and Development (M&D) has shown that migration and development are closely interrelated fields and that migrants can strongly contribute to development in the country where they come from. According to the World Bank, the volume of money sent by migrants around the world to the African continent is currently bigger than the Official Development Aid (ODA) and reached nearly $40 billion (2.6% of the GDP) in 2010. Remittances not only enhance the livelihood of families in developing countries, but can also boost economies, finance micro-credit schemes or infrastructures and contribute to development programs in countries of origin. Therefore, migrants have a great potential to offer in favor of development. The question is: how can we effectively unlock it?
An estimated one in ten tertiary educated adults born in the developing world resides in the developed world; 30 to 50 percent of those trained in science and technology
The return of expatriates to their home country is widely perceived as being beneficial; favorable impacts have been attributed to returning scientists and engineers in Korea and China.
Why Diaspora Bonds? Why not? Nigerians love to travel and live abroad. We probably have more Nigerians abroad than any other African country. Nigerians in Diaspora remit an average of $300 per month to families in Nigeria. There are so many advantages of Diaspora bonds. One of the advantages if we have to borrow a leaf from Israel is keeping Diaspora actively engaged in the welfare of Nigeria or encouraging patriotism amongst Nigerian nationals abroad. Apart from the patriotism, Diaspora bonds may also help the investors save money from cost of sending money to Nigeria via Western Union. Most times, when people abroad send the money to their relatives, these monies ended up being misused. I have read instances on the news whereby folks kept repatriating money home thinking they were investing or that the money were being invested only for them to find out that the money have been squandered by their relatives. With Diaspora bonds at least you are sure where your money is going. The bonds are tax-exempted,
Implying bigger income for the investors; the bonds provide an alternative investment to equities, real estate and bank deposits. Bonds can also be used as collateral for borrowing from banks and discount houses, and bonds can be sold either through any of the 21 PDMMs licensed by the DMO or on the floor of the NSE”.
Factors to Consider before issuing Diaspora Bonds:
Based on my research, there are several factors to consider before issuing Diaspora bonds. Some of these factors are: the size and wealth of Nigerians in Diaspora; the compactness or dispersion of Nigerians in Diaspora; level of patriotism; integrity and stability of legal systems in Nigeria; and the potential for full subscription of the bond itself.
According to World Bank’s report, Nigeria made $10 billion (N1.5 trillion?) from remittances made by its citizens living abroad in 2008. While I don’t have the census of all Nigerians scattered all over the world, it will not be a stretch to assume that on the average, Nigerians remit over $100 million annually via Western Union, Money Gram etc to Nigeria. Note that these remittances via Western Union, Money Gram and the rest of them come with a huge cost---as you have to pay processing fees to send money to your families or whatever via these companies. When you think about it, if Nigeria made a staggering $10 billion from remittances made by its citizens living abroad in 2008, then it won’t be a stretch to deduce that the money that Nigerians in Diaspora remit annually represents a significant percentage of Nigeria’s gross domestic product. Most families in Nigeria depend solely on their families abroad for their sustenance. Most will go hungry without these remittances from Nigerians in Diaspora. According to the UN's Office of the Special Adviser on Africa (OSAA, the average African migrant living in a developed nation is sending $200 per month home to his or her family. In its report, it stated that “...Remittances from Africans working abroad in the period 2000-2003 averaged about US$17 billion per annum virtually overtaking Foreign Direct Investment flows which averaged about
$15 billion per annum during the same period.
North America accounted for nearly half of the remittance inflows in April 2013, while Europe and the rest of the World accounted for 27 percent and 24 percent, respectively. In May 2013 North America accounted for 52 percent of the remittance inflows, while Europe and the rest of the World accounted for 26 percent and 21 percent, respectively. North America’s dominant position is a reflection of the large number of Nigerians with gainful economic activities in the region.
According to the world bank and International Organization for Migration(IOM), Remittances generally reduce the level and severity of poverty, typically leading to higher human capital accumulation; greater health and education expenditures; better access to information and communication technologies; improved access to formal financial sector services; enhanced small business investment; more entrepreneurship; better preparedness for adverse shocks such as droughts, earthquakes, and cyclones; and reduced child labor.
Diasporas can be an important source of trade, capital, technology, and knowledge for countries of origin and destination. Remittance flows to developing countries are estimated to have totaled $401 billion in 2012, an increase of 5.3% over the previous year. Global remittance flows, including those to high-income countries, were an estimated $529 billion in 2012.
The top recipients of officially recorded remittances in 2012 were India ($69 billion), China ($60 billion), the Philippines ($24 billion), Mexico ($23 billion) and Nigeria ($21 billion). Other large recipients included Nigeria, Egypt, Pakistan, Bangladesh, Vietnam and Lebanon. However, as a share of GDP, remittances were larger in smaller and lower income countries; top recipients relative to GDP were Tajikistan (47%), Liberia (31%), Kyrgyz Republic (29%), Lesotho (27%), Moldova (23%) and Nepal (22%). Remittances sent home by migrants to developing countries are equivalent to more than three times the size of official development assistance and can have profound implications for development and human welfare. Remittances can contribute to lowering poverty and building human and financial capital for the poor.
Despite the current global economic weakness, remittance flows are expected to continue growing, with global remittances expected to reach $608 billion by 2014, of which $468 billion will flow to developing countries. Barely few days ago, Nigeria federal government announced that Nigerians in the Diaspora remitted N3.36 trillion (US$21 billion) in the last one year, as roughly 15 million Nigerian citizens are living abroad legitimately registered and gainfully employed. Furthermore, Secretary to the Government of the Federation (SGF), Hon. Anyim Pius Anyim, also declared that records had shown that Nigerians in Diaspora remitted about 21 billion USD...which today is one of the highest in Africa and this figure does not include unrecorded sums sent through individuals to relatives in homeland. One will conclude that alone put forth the legitimacy of Nigerians in Diaspora power to make difference in the homeland if this resources were thorough coordinated to serve as development financing through issuance of Nigeria Diaspora bonds..
In conclusion, some concerns have been raised that a significant amount of remittances sent by the Diaspora is used for direct consumption without getting into long term investment and savings, diminishing the money’s impact on the development of Nigeria. This is where Diaspora bonds come in. Diaspora bonds from what I have read typically mature in 5 – 7 years and pay annual dividends between 5% and 8%. (Currently, I don’t think bank deposit and certificate of deposit interest rates are more than 2%). Every year, the bond pays the purchaser this interest and at the end of the term, the purchaser receives her principal as well as the accrued interest. No doubt in my mind that Diaspora Bonds can serve as catalyst to unlock capital development financing.