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Africa Needs Remittances More Than Ever

Much of the world is now breathing a collective sigh of relief. Asian countries like Pakistan probably averted an economic crisis thanks to record remittance payments. The picture in Africa is more nuanced. Recent headlines point to a 12.5% fall in remittances to Sub-Saharan Africa in 2020. But this was almost entirely caused by a 28% drop in remittances to Nigeria, the continent’s largest economy. Excluding Nigeria from the data shows that remittance flows to Sub-Saharan Africa rose by 2.6%. This is an excellent result for developing countries, especially given that in most cases remittances now make a larger contribution to capital flows than foreign direct investment or aid. But we must not mistake this stay of execution for a full pardon. Nothing holds out indefinitely against economic gravity, especially when government support is removed. For this reason, remittances should be part of the recovery plan for all nations as they vaccinate their populations and reopen for business.