The reported surge in diaspora inflows to Nigeria, according to Yemi Cardoso, the Governor of the Central Bank of Nigeria (CBN), is somewhat heart-warming and a welcome development in the revival of the Nigerian economy, in some respects.
According to Cardoso, Nigeria’s diaspora remittances surged by 200 per cent to $600 million in the past two months, up to August 2025. While the trend is relatively short and cannot be used as a clear indication of the pattern of inflow of diaspora funds, it nonetheless shows that the harmonisation of the rates in the foreign exchange market has its benefits. This does not consider the fact that it has led to the increased cost of local production.
This harmonisation of rates has created numerous challenges to the manufacturing and other productive sectors, especially for firms that rely largely on imported inputs in their production process. It is hoped, however, that this resurgence of diaspora inflows in the past two months can be sustained for a reasonable length of time, as a means of contributing to the stabilisation of the economy.
The inflow of remittances or diaspora funds is a phenomenon that cuts across the African economy and the entire developing world. Due to the search for economic opportunities in the economies of Western countries necessitated by economic downturns in the home country, this pattern of inflows has been on the increase for decades. In fact, many of these countries rely on workers’ remittances to cushion the paltry foreign capital inflows in their economies. These inflows have been used for domestic consumption and/or investments.
Remittances contribute greatly to the families of migrants and even to the foreign capital inflows of the home country. There was an upward trend in remittances over the years across the African continent. This increase in remittances is proof that it is a major source for economic development. The remittances that flow in both through the formal channels, through the financial institutions, as well as through the informal, increase credit availability in the remittance receiving country, as well as lead to increase in pooled investment, in funding joint ventures as well as lead to increase in the personal investment of the recipients which stimulate investment in small scale industrialisation, among others.
However, the management of these inflows is also an issue that needs closer scrutiny. The harmonisation of the rates in the foreign exchange market in Nigeria, while boosting these diaspora inflows, has had negative effects on the living standards of the average Nigerian. Of a truth, the exchange rate has been the sole instigator of the increase in the diaspora flows. Hence, the cheery news of the growth in the inflows is not based on any fundamental economic success aside from the attractive exchange rate it affords Nigerians in the diaspora to send their hard-earned foreign currency home to their families for consumption and or investments.
Many persons still feel that the current exchange rate of about N1.500 to US$1 is on the high side and has been identified as one of the factors fuelling the increased rate of inflation in the country. Due to the frequent spike in the monetary policy rate (MPR) by the CBN since the inception of the Tinubu administration, it is obvious that inflation has been clearly identified as a key problem to be addressed in the economy’s stabilisation.
By making credit tight in the quest to fight inflation, the CBN has clearly been working against an increase in production, as the cost of borrowing is not favourable to the manufacturing sector, especially for small and medium-scale enterprises (SMEs). While the CBN is rejoicing that diaspora inflow is on the increase, albeit for only two months, the economy is not growing optimally due to the set of policies put in place to attract foreign capital as well as fight inflation.
So, the increase in the diaspora inflow to the country can rightly be described as a pyrrhic victory. It is thus not yet “uhuru” for the Nigerian economy. The damage to the economy from having such a high rate of exchange of the naira to the United States dollar is quite significant. Living standards have been seriously compromised and the minimum wage of N70,000 is not enough to take care of a single low-income worker, even for the purposes of his very basic needs. Many SMEs are struggling to get finance to plough into their business, and, given the credit squeeze due to the high level of interest rates, their businesses are largely struggling. So, the Governor of the CBN need not rejoice yet.
Largely, the inflow of diaspora funds does not directly benefit the small-scale businesses aside from the portion of the inflows that come directly to them from their related wards and associates abroad. The CBN needs to design a broad-based programme in liaison with the fiscal authorities for the efficient management of the macroeconomic indicators, such that the benefits of economic policy will reflect positively in the living standards of the ordinary Nigerian.
