Nigeria eyes $10bn diaspora fund

Nigeria is taking bold steps to boost its economy with the establishment of a $10 billion diaspora fund aimed at attracting dollar inflows and foreign investments into critical sectors such as infrastructure. Victor Aluyi, Head of Investment at Sankore Global Investment, shared insights on this development during an interview on CNBC Africa. Aluyi emphasized the significance of remittances as a key source of private external finance that is expected to grow in the coming years. The Nigerian government is keen on leveraging these remittances to mobilize capital and support development finance. With remittance flows to developing countries surpassing Foreign Direct Investment (FDI) flows, Nigeria stands to benefit from tapping into this financial resource. The country's diaspora remittance was valued at around $20 billion at the end of last year, according to Aluyi. However, due to distortions in the foreign exchange (FX) market, a considerable portion of these remittances flowed through unofficial channels, indicating even higher potential inflows. The establishment of the diaspora fund presents an opportunity to formalize and maximize these remittances for economic growth. In light of the current economic challenges facing Nigeria, including debt burdens and FX volatility, the diaspora fund offers a promising solution. By harnessing the financial contributions of Nigerians living abroad, the government aims to strengthen its finances, address debt concerns, stabilize the FX market, and enhance the value of the local currency. While exploring various options such as loans from international institutions and capital market investments, the diaspora remittance stands out as a valuable resource that can drive sustainable economic development. Aluyi suggested that integrating diaspora funds into long-term debts through a diaspora bond mechanism could offer a robust framework for capital retention and growth. The World Bank's data underscored Nigeria's prominence in remittance inflows within the sub-Saharan region, with the country accounting for a significant share. Despite the positive outlook for remittances, questions remain about whether these funds alone can alleviate the economic pressures faced by Nigeria. The government must carefully balance its financial strategies, considering options like leveraging the diaspora bond and tapping into varied funding sources. Recent financial partnerships and agreements, including collaborations with Multilateral Investment Guarantee Agency (MIGA) and international institutions like the World Bank, signify progress in securing external funds. The clearance of FX backlogs and impending financial inflows, such as the anticipated $2.25 billion from the World Bank, are steps towards stabilizing the economy. Amidst these efforts, there is a looming deadline for banks to submit their capitalization plans, adding a sense of urgency to the financial landscape. The recapitalization requirements have spurred banks to strategize and seek shareholder approval within a tight timeframe. While some institutions have shown preparedness, the possibility of a deadline extension to accommodate all banks remains on the horizon. As Nigeria navigates through economic reforms and financial restructuring, the establishment of the diaspora fund emerges as a pivotal move towards economic recovery and growth. By harnessing the resources and expertise of its diaspora community, Nigeria aims to fortify its economic foundation and chart a sustainable path towards prosperity.