Somalia is turning to its diaspora to bolster its Foreign Direct Investment (FDI) inflows.
Seth Onyango, bird story agency
Mogadishu is ramping up efforts to increase remittance inflows to shore up its forex reserves, fuel consumption and ensure macroeconomic stability.
With diaspora remittances already reaching an estimated US$1.6 billion annually, the government hopes its outreach program, launched last year, will boost these figures.
In early July, the Horn of Africa nation held its second annual diaspora conference, seeking to tap investment opportunities from its citizens abroad, feed its exchange reserves, and help the Central Bank shield the shilling from excessive volatility.
Ministers, lawmakers, civil society, and business representatives from the country’s diaspora attended the conference in the capital, Mogadishu.
"Somali diaspora communities play a crucial role in Somali livelihoods through remittances, humanitarian assistance, and participation in reconstruction efforts," Abshir Omar Jama, Minister of Foreign Affairs and International Cooperation, said in his opening remarks.
Sources indicate the government is mulling a plan, devised in conjunction with national and international financial institutions, to issue a sophisticated diaspora bond.
Somalia does not currently issue government bonds or corporate bonds. There is one private stock exchange operating in Somalia, but the government has no authority to regulate trade in stocks and securities.
Every year, the Somali diaspora sends home approximately US$1.6 billion, according to the UN Development Agency and remittances now account for 20-45% of Somalia's economy, exceeding humanitarian aid, development aid, and foreign direct investment combined.
With FDI inflows underperforming, the government is encouraging “Somali solutions to Somalia’s problems” through the financial firepower of its million-plus overseas workforce.
Somali businesses and communities are thriving worldwide, from Nairobi in Kenya to Minnesota in the U.S., to both the remote areas and urban centres of South Africa, where they have forged livelihoods and created a thriving community for more than twenty years.
Tellingly, one-third of Nairobi's tax revenue comes from taxes paid in Eastleigh, fondly known as “Little Mogadishu.”
According to MNopedia, Minnesota hosts one of the largest Somali communities in the Somali diaspora, with the number of Somalis living in the state ranging from 30,000 to over 100,000.
Underpinning their influence, Somali-born Ilhan Abdullahi Omar has been the U.S. representative for Minnesota's 5th congressional district since 2019.
The Somali government’s proactive approach to rake in more remittances comes from a backdrop of economic instability and a decline in FDI.
Experts view this ambitious program as a necessary pivot for Somalia given its unique circumstances, where it still faces insurgencies from the Al-Shabab militant group.
This innovative strategy signals a potential shift for the Somali economy from an ‘aid-dependent’ nation to an investment-driven one.
If successful, this plan could provide a blueprint for other nations experiencing similar economic challenges, illustrating the diaspora communities' potential as a significant financial resource.
bird story agency