Remittances (money sent by the diaspora or migrants to their home countries) play a crucial role in many African economies. They serve as a stable and often growing source of foreign income, sometimes surpassing foreign direct investment and official development assistance. For countries like Nigeria, Egypt, Ghana, Kenya, and Senegal, remittances contribute significantly to national GDP.
At the household level, remittances improve living standards by helping families cover basic needs such as food, education, healthcare, and housing. They also provide a form of social insurance during economic downturns or crises. In rural areas especially, these funds can reduce poverty and promote financial inclusion by encouraging the use of banking and mobile money services.
Beyond household support, remittances can have broader developmental impacts. They can boost local economies by increasing consumption, supporting small businesses, and fostering entrepreneurship. However, their potential is often underutilized due to high transfer costs, lack of financial literacy, and limited investment channels.
Given the significant role remittances play in African economies, is it advisable for governments to impose taxes on diaspora contributions, or would such a policy risk undermining their developmental impact