REMITTANCE INFLOWS AND ECONOMIC GROWTH IN NIGERIA

Abstract

This study investigated the effect of remittance inflows on economic growth in Nigeria, while taking into account factors like foreign direct investment (FDI), exchange rates, and inflation. Using ex-post facto research design and secondary data covering the period 1979–2024, extracted from the Central Bank of Nigeria and World Development Indicators. The Autoregressive Distributed Lag (ARDL) model and bounds test approach were employed to investigate both short-run and long-run relationships among the variables. The unit root tests showed a mixed order of integration, with inflation stationary at level I(0), while gross domestic product, remittance inflows, foreign direct investment and exchange rate were stationary at first difference I(1), making the ARDL method suitable for our analysis. The ARDL bounds test produced an F-statistic of 6.728, greater than the 5% upper-bound critical value of 4.01, confirming the existence of a long-run relationship/cointegration among the variables. The findings revealed that remittance inflows have a positive and statistically significant effect on economic growth, with a coefficient of 0.409 and probability value of 0.000. Exchange rate also exhibited a positive and significant relationship with GDP, while inflation exerted a negative and significant effect. In contrast, FDI had a negative but statistically insignificant effect on economic growth. The study concluded that remittance inflows constitute an important source of development finance for Nigeria when directed towards productive activities. The study recommended policies that reduce the cost of formal remittance transfers, stabilize exchange rates, promote financial inclusion and productive investment of remittances, strengthen and improve the investment climate for FDI.