A recent World Bank report highlights that Sub-Saharan Africa still bears the highest remittance costs among regions.
In 2023, the expense of sending money to countries in the Sub-Saharan African region from the diaspora increased, reaching fees as high as 36% for every $200 sent from abroad. This prolonged its status as the most expensive region for money transfers, maintaining this position for the 15th consecutive year.
In a year-on-year comparison, the average cost of sending $200 to sub-Saharan Africa experienced a slight uptick, increasing to 7.9% in the second quarter (Q2) of 2023 from 7.8% in the corresponding period of 2022.
According to a section of the World Bank report:
“Sub-Saharan Africa remains the region with the highest remittance costs. The average cost of sending $200 to the Sub-Saharan Africa region slightly increased, averaging 7.9% in 2023Q2 compared with 7.2% in 2022Q2. A stable price has been observed in remittance costs in the region since 2021, but this average remains far above the global average of 6.9% and the SDG target of 3% by 2030.
Costs vary substantially across the region, ranging from 1.3–4.5% in the lowest cost corridors to 17–36% in the highest.
World Bank Report
“Costs vary substantially across the region, ranging from 1.3–4.5% in the lowest cost corridors to 17–36% in the highest. For example, sending $200 in remittances from Tanzania to neighboring Uganda would have cost a migrant 39.1% in 2023 Q2”.
The report indicates that Nigeria holds the top position in the ranking of Sub-Saharan African countries with the highest remittance cost. In 2023, Nigeria led in remittance receipts with $20.5 billion, constituting a significant share of remittance flows to the region.
Following Nigeria were Ghana and Kenya, with $4.9 billion and $4.2 billion, respectively. The World Bank notes that the global average cost of remittances to the region remains high, standing above 6.9 percent.
The bank emphasized that traditional banks significantly contribute to the rise in remittance fees, being identified as the entities charging the highest costs.
Banks remain the most expensive channel for sending remittances, with an average cost of 12.1%, followed by post offices (7%), money transfer operators (5.3%), and mobile operators (4.1%).
Highlighting the high costs imposed by banks, the World Bank underscores the significance of cross-border mobile money transactions. In Kenya, Rwanda, Tanzania, and Uganda, the potential of such transactions is hindered by limited interoperability among telecom operators and money transfer operators.
However, the Bank voiced concern over the persistently high remittance costs. Dilip Ratha, a World Bank lead economist, revealed that in recent years, remittance flows to developing countries have surpassed the combined total of foreign direct investment and official development assistance.
This raises concerns as migrants stand to lose millions of dollars annually in remittance charges. Additionally, amidst worries about the elevated cost of remittance to Sub-Saharan Africa, recent reports indicate that Nigerian banks will implement an electronic money transfer levy on foreign currency inflows equivalent to N10,000 and above from January 2024.
This initiative is expected to exacerbate the high cost of remittance, potentially redirecting more foreign exchange transactions to unofficial markets.
