Africa’s remittance market projected to reach $500 billion by 2035

Remittances are pivotal in many African economies, significantly boosting their Gross Domestic Product (GDP). In 2022, remittances comprised 7.6 percent of GDP in Western Africa, 6.8 percent in Eastern Africa, 4.4 percent in Northern Africa, 3.7 percent in Southern Africa, and 1.4 percent in Central Africa.

The total remittance value in Africa neared US$100 billion, including US$20 billion in intra-Africa transfers. North Africa received the largest share, followed by West Africa, with Egypt (US$31.5 billion), Nigeria (US$21 billion), and Morocco (US$10.4 billion) accounting for 65 percent of the continent’s remittances.

Despite their importance, sending remittances to Africa remains costly, averaging 7.39 percent in the third quarter of 2023 for a US$200 transfer – far above the global average. Factors like limited competition, regulatory barriers, and underdeveloped financial systems contribute to these high costs.

The UN’s Sustainable Development Goals aim to reduce remittance fees to 3 percent by 2030, with no corridor exceeding 5 percent. Progress has been made, with costs declining across top corridors and in Sub-Saharan Africa, falling from 7.92 percent in the second quarter of 2023 to 7.39 percent in the third quarter of 2023.

Mobile money has revolutionized remittances in Africa, offering cheaper alternatives. In West Africa, sending via mobile averages 1.5 percent, lower than banks (1.7 percent) and cash transfers (6 percent). Increased interoperability and supportive regulatory frameworks, like the Pan-African Payment & Settlement System, are expected to further reduce costs.

Several innovative companies are reshaping the African remittance landscape. Zepz provides tech-driven, secure transfers to over 130 countries, including many in Africa. LemFi bridges banking and mobile money in Nigeria, while Chipper Cash expands its network with partnerships like TBD. Nala focuses on user-friendly solutions in East Africa, and Mukuru offers diverse financial services across Southern Africa.

Beyond consumer services, B2B players like CAB Plc and Onafriq streamline cross-border transactions, supporting market growth. VertoFX facilitates global B2B payments with competitive rates, and Cellulant simplifies payments across Africa.

The African remittance market is poised for continued growth, projected to reach US$283 billion by 2035 from US$100 billion in 2022. To maximize this potential, stakeholders must collaborate to lower costs, enhance digital access, promote financial inclusion, and foster innovation. By creating an enabling environment, Africa can harness remittances for sustainable development and economic resilience, crucial amid currency challenges in Sub-Saharan Africa.