In 2023, the average cost of sending a $200 remittance to the Sub-Saharan Africa (SSA) region increased to 7.9%, up from 7.4% in the previous year, according to the latest World Bank report on migration and development in Lower- and Middle-Income Countries (LMICs). This makes SSA the region with the highest remittance costs globally.
The report highlighted that the cost of sending remittances within some African countries reached as high as 33% for $200. In contrast, the global average for remitting $200 to low- and middle-income countries was 6.4%, with South Asia having the lowest average cost at 5.4%.
“Sub-Saharan Africa remains the region with the highest remittance costs,” the report stated. “Senders had to pay an average of 7.9 percent to send $200 to African countries during 2023Q4, compared with 7.4 percent in 2022Q4. Costs vary substantially across the region, ranging from 2.1–4.0 percent in the lowest-cost corridors to 18–36 percent in the highest.”
The high costs of remitting funds within SSA are particularly burdensome. For example, sending $200 from Tanzania to Kenya, Uganda, and Rwanda costs more than 33% in 2023Q4. These high fees diminish the positive impact of remittances on consumption and poverty reduction in developing nations.
Despite the high costs, remittances continue to outpace Foreign Direct Investment (FDI) in LMICs. In 2023, remittance inflows into SSA were 1.5 times higher than FDI. Nigeria received the highest remittances in the region, amounting to $19.5 billion, or 35% of the total inflow into SSA. Ghana and Kenya followed with $4.6 billion and $4.2 billion, respectively.
Countries heavily reliant on remittances include Gambia, Lesotho, Comoros, Liberia, and Cabo Verde, where these funds account for one-fifth of GDP.
The report also outlined potential risks to remittance inflows in 2024, such as lower growth in developed economies, escalating conflicts like the Israel-Hamas situation, security issues in the Sahel region, and climate-related challenges in Southern Africa. Despite these risks, the Eurozone showed unexpected economic resilience in early 2024, growing by 0.3% quarterly and 0.5% year-on-year, offering a silver lining amid global uncertainties.
The United Nations aims to reduce the cost of sending $200 in remittances to around 3% by 2030, to maximize the economic benefits for recipient households. As efforts continue to lower remittance costs, the financial impact on migrants and their families remains a critical area of focus for global economic development.
