This article was written by Antonia Esser, Principal at Cenfri. The original article was published by Cenfri. You can find the article here.
Several measures have been developed to calculate the contribution of remittance inflows to economic growth in a country or region. One popular figure, that shows the relative importance of remittances for national income, is “remittances inflows as a percentage of GDP”. This indicator, made periodically available by the World Bank, expresses (mostly formal) remittances as a percentage of GDP to show the relative importance of these cross-border inflows for a country.
But it is a slightly misleading indicator. Remittances are not included in official GDP calculations as they do not directly contribute to the total value of goods and services produced within a country’s borders. Also, this indicator does not holistically account for the large yet hidden sums of remittances that cross borders informally. However, it provides a useful basis for comparison between countries and regions.
When we look at the African countries with the highest percentage of remittances to GDP in 2024 (which are estimates at this stage), e.g., The Gambia (21.4%), Lesotho (20.6%), South Sudan (17.5%), Liberia (16.8%) and Somalia (13.6%), what we can say is that the remittances inflows when compared to or expressed as a share of GDP are extremely important for these countries’ economy.
The 48 African countries for which data is available received an estimated total of over USD 95 billion from their diaspora in 2024, a 5.2% increase since 2023. Compared to USD 84 billion in 2020 and USD 67 billion in 2016, remittances are rapidly growing (more analysis and data on this is available through RemitScope).
In terms of income for African countries, this is positive, and it certainly contributes to economic growth at home. Remittances flow directly into micro economies and local communities, supporting livelihoods, and cementing the strong cultural ties that the diaspora retains (often over multiple generations of migrants).
Over half of African countries depend on oil, gas, or minerals for at least 60% of export earnings and also face higher concentration and less diversification of risk, leaving them vulnerable to external shocks. Remittances can partially offset any losses and provide countries with regular capital injections.
This year’s International Day of Family Remittances (IDFR) campaign focused on showcasing how remittances contribute to financing development including by funding long-term investments like education and healthcare, and boosting economies through financial flows, skills, and direct investment.
Why more money might mean more migration
An increase in remittance inflows can mean one of several things. One is that there is simply better recording of formal flows. Two other scenarios are also likely: 1) the diaspora is earning more money/ sending more of their income back home through formal channels or 2) the diaspora is growing.
There is some evidence that the first scenario could be partially responsible for the remittances increase, at least for select African countries. The US census from 2024 shows that migrants from South Africa, Kenya, Cameroon, Nigeria, Egypt, and Ghana on average earn more than the US average annual income – “this is the first statistically significant annual increase in real median household income since 2019…”. Comparable data from Europe (the preferred destination for migrants that leave the continent) is not available.
Yet, the second scenario above is far more likely: the diaspora is growing and so more people are sending money back home. Migration within and out of Africa has in fact increased significantly over the years and is expected to continue growing (Figure 1).
Economic gains or economic gaps? Migration’s double-edged impact
Contrary to popular belief most migrants remain on the continent. Around 21 million Africans were living in another African country in 2020 (latest available data) – compared to 18 million in 2015.
In comparison, 11 million Africans live in Europe and three million in North America. According to IOM, most migration is due to economic and labour reasons, i.e., to find a (better) job. Forced displacement and asylum/refuge-seeking are however also significant drivers of people leaving their home countries.
Therefore, as we look at countries that show significant growth in terms of remittance inflows, or, as above, with a rising percentage in GDP terms, it is important to examine the migration flows out of these countries more closely and the reasons why people choose to leave.
An increase in migration (and a subsequent increase in remittances) can highlight a shortage of economic opportunities at home even if real GDP is, on aggregate, on the rise. In these volatile geopolitical times where more emphasis is placed on increased trade within Africa, and on African self-reliance in the face of development aid funding cuts, pressure will increase to address domestic stumbling blocks that currently incentivise migration.
From celebration to reflection: a case for better and more data
The IDFR campaign rightly recognises the immense contributions of remittance senders on their families and communities, but it is just as important to draw attention to the causes of migration and the solutions that could improve the conditions for those who do not necessarily want to leave their home country. Education, job creation, entrepreneurial support, climate change adaptation and mitigation, health improvements, to name a few – the drivers allowing people to prosper are multi-faceted and context-specific.
In addition, further quantifying and amplifying the contributions that migrants make in sending countries will be key, as myths around migration can better be debunked. Research shows that migration can have significant economic benefits for both destination and origin countries.
Remittances remain a lifeline for millions and an important part of development finance. But measuring their true contribution to economic growth remains complex. There is a need for more granular, nuanced, and disaggregated data to complement high-level figures from both a sender and recipient country perspective. For example:
The more data we have and the better the quality of the data, the better the opportunity to measure and showcase remittance successes and advocate for reforms, such as the removal of remittance taxes, for example. We therefore call on authorities and development partners to collect data that allows for the establishment of these more refined remittances indicators, especially in relation to economic growth.
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