Tracking key trends for African remittances in 2022

Remittance inflows to Sub-Saharan Africa saw a notable increase in 2021, growing by 6.2% to reach $45 billion according to data from the World Bank. This resurgence in remittances after a challenging period during the pandemic has sparked discussions on the key drivers behind this growth and the anticipated trends for 2022. Financial markets consultant from Northwest LLC shed light on the current landscape and provided insights on the future of remittances in Africa during an interview with CNBC Africa. The discussion delved into key remittance corridors, market barriers, potential impacts of the Ukraine and Russia conflict, and the growing interest in digital currencies for cross-border transfers. The African continent serves as a focal point for remittances flowing from developed countries, particularly to regions with significant diaspora populations. One prominent corridor highlighted by the consultant was the flow of remittances from the United States to Nigeria, as well as other parts of West Africa such as Liberia. Additionally, the movement of migrant workers within Sub-Saharan Africa, notably to South Africa, was emphasized as a key channel for remittance flows. Countries within the same monetary union, like those in the West African Monetary Union sharing the CFA franc, also saw substantial remittance activity due to the ease of transactions without the need for currency exchange. Moreover, the consultant pointed out that countries with pegged currencies, like the CFA franc to the euro, provided a stable platform for remittance transfers, attracting financial service providers with a predictable value proposition. The interview also addressed the potential impacts of geopolitical events, particularly the conflict between Ukraine and Russia, on remittance flows. The correlation between oil prices and economic activities was highlighted, with the consultant noting that remittances tend to fluctuate in tandem with oil price movements. The conflict's impact on oil prices, as Russia is a significant oil provider globally, may influence remittance trends in the coming months. However, the exact ramifications on remittance flows remain uncertain, and monitoring the situation will be crucial to understanding the broader economic landscape. The conversation then shifted to the rising interest in digital currencies across African countries and their potential impact on remittance volumes. While the adoption of digital currencies could offer a cost-effective and efficient means of transferring money, concerns around volatility and market maturity currently limit their widespread use for remittances. The consultant acknowledged the long-term potential for growth in digital currency remittances in Africa, highlighting the need for financial service providers to build confidence in the stability of cryptocurrencies. Furthermore, the discussion touched upon the market barriers hindering the efficient flow of remittances in Africa. Key challenges such as limited volume of transactions between countries, volatile exchange rates, and the prevalence of informal channels for remittances were cited as significant barriers to seamless transfers. As labor mobility increases and economic development progresses, the landscape for remittances in Africa is expected to evolve, facilitating smoother and more interconnected flows across borders. Addressing these barriers will be essential for enhancing the efficiency and accessibility of remittance services in the region, ultimately contributing to greater financial inclusion and economic development. In conclusion, the outlook for African remittances in 2022 remains positive, with growth expected to continue and potentially surpass pre-pandemic levels by 2023. Understanding the key trends, challenges, and opportunities in the remittance market will be crucial for stakeholders seeking to navigate the evolving landscape and support the flow of funds to families and communities across the continent.