The Japa Buffer
Another way to think about remittances
Epistemic Status - Speculative
Migration continually remains a prominent topic in Nigeria's public discourse. This discussion frequently centers on the 'brain drain' phenomenon, where countries lose their skilled workers, like doctors, to other nations. This outflow leaves the originating country with significant deficiencies in critical sectors and services. For those convinced of the brain drain's impact, the solution might involve implementing moderately restrictive migration policies. One proposal includes requiring skilled workers who benefited from subsidized or public education to serve a mandatory period in their home country. More extreme suggestions include prohibiting medical professionals from emigrating altogether. This has led some African nations to enact such laws, while others are still considering similar measures.
The worries about the shortage of medical workers are not overrated, as Ken Opalo noted;
There is a significant shortage of doctors and other medication professionals in Africa. For example, according to the standard measure of physicians per 1000 people, the region (0.2) lags the world average (1.6). Nigeria, Africa’s most populous country, stands at about a quarter the global average (0.4), while Kenya (0.2), Malawi (0.05) and others are even lower. Even relatively wealthier South Africa (0.8) is below the global average. The effects of the shortage are likely to worsen as rising incomes and higher life expectancy in the region create demand for treatment of “lifestyle diseases” and chronic medical conditions requiring specialized care.
But many others, like me, are not persuaded that banning emigration is the right policy response. Firstly, restrictive policies are illiberal and can be a dangerous tool of tyranny. Secondly, there are some grounds to question the brain drain argument - the most popular being a study by economists Micheal Clemens and Justin Sandefur about nurses in the Philippines;
This common idea that skilled emigration amounts to "stealing" requires a cartoonish set of assumptions about developing countries. First, it requires us to assume that developing countries possess a finite stock of skilled workers, a stock depleted by one for every departure. In fact, people respond to the incentives created by migration: Enormous numbers of skilled workers from developing countries have been induced to acquire their skills by the opportunity of high earnings abroad. This is why the Philippines, which sends more nurses abroad than any other developing country, still has more nurses per capita at home than Britain does. Recent research has also shown that a sudden, large increase in skilled emigration from a developing country to a skill-selective destination can cause a corresponding sudden increase in skill acquisition in the source country.
Of course, the Philippines is not every developing country, but advocates of the brain drain have generally stood on very weak empirical grounds so far. Critics frequently cite the shortage of medical professionals in African countries as a notable consequence. However, this issue is complex and cannot be solely attributed to emigration. Several underlying structural problems contribute significantly: low demand for healthcare services due to widespread poverty, a historical shortage of medical workers, insufficient public investment in healthcare, and the effectiveness of inexpensive global public health initiatives. These factors overshadow the role of migration. Therefore, imposing restrictions on the emigration of medical workers is not a viable solution to these deep-rooted issues. Instead, such measures may be counterproductive. Offering incentives for skilled workers to remain in their home country is a more constructive approach than enforcing outright bans on emigration. Research supports this, showing that emigration tends to increase, rather than decrease, as countries become wealthier.
Another frequently noted argument against emigration restrictions is the impact on remittances. Take Nigeria as an example, where remittances significantly surpass foreign investment inflows. Policies that restrict migration tend to decrease remittances, leading to adverse economic impacts for households. While some suggest that remittances could be channelled into investments, they often take various forms. In Nigeria's situation, remittances predominantly go directly to individual households, primarily supporting their consumption needs.
Remittances as a stabilising force?
This brings me to the main point of this post. In the last decade or so, Nigeria's economy has confronted formidable challenges, with a noticeable surge in poverty severely impacting households. As incomes dwindle and prices keep rising, the escalating cost of living has become a pressing concern. In this precarious economic landscape, remittances are not just supplementary income; they are increasingly becoming the bulwark against social unrest. These funds are more than financial support; they are a stabilising force. By cushioning families from the harsh realities of economic downturns, remittances ensure that despite the volatility, the basic needs are met. This economic buffer plays a pivotal role in maintaining social order, as households are safeguarded from the immediate risks of economic shocks.
It is quite common to hear references to the consumption of Nigerians as an example of their resilience - or as conspicuous evidence of why the government will think their suffering is overstated. Every December, scores of Nigerians abroad come home for weddings, concerts, and other social events. Despite the apparent inequality between the returnees and residents - it is also a rare boon time for relatives, businesses, and the local economy. Understanding the role of remittances in household consumption, and its socioeconomic effects should be important for any future policy.
If remittances are a stabilizing force from social unrest that might arise from economic shocks, then we can also argue they can be a source of complacency. Rarely is the mismanagement of the economy by the government met with public anger. The famed Nigerian resilience can also be said to have evolved into civic docility. However, there are some caveats. Political inaction may simply be due to the ability of political elites to instigate factors that highlight the heterogeneity of Nigerians - and hence making civic organising costly and ineffective.
After all, the story of post-independence Nigeria is not exactly rich with examples of successful non-partisan civic movements.
Speaking to remittances, it's quiet funny that some people are now suggesting that the FG should go after domiciliary accounts to look for scarce forex. One common point of failure of the last administration was using the stick approach in its economic policies. It's what created the disaster we have today. That people don't realise it's ineffectiveness is alarming.
Incentives always work better than restrictions.