IMPACT OF DIASPORA REMITTANCES INFLOW ON ECONOMIC GROWTH IN NIGERIA: A FMOLS approach

Abstract

This study examines the impact of diaspora remittances inflow on economic growth in Nigeria over the period 1980–2024 using the Fully Modified Ordinary Least Squares (FMOLS) method, the study models gross domestic product (GDP) as a function of diaspora remittances (DREM), exchange rate (EXCHR), trade openness (EXIM), and inflation (INF). The result reveals that GDP maintained a relatively stable growth pattern while remittances exhibited high volatility Exchange rate also showed significant instability. The Augmented Dickey-Fuller test indicates that all variables are integrated of order one, I (1), while the Johansen cointegration test suggests weak evidence of a long-run relationship. The FMOLS results show that DREM and EXCHR have positive and statistically significant effects on GDP, whereas EXIM and INF coefficient are negative and statistically insignificant. The model exhibits strong explanatory power with an R-squared of 0.9321 and adjusted R-squared of 0.9252. Diagnostic tests confirm model reliability, with normally distributed residuals and parameter stability. The study concludes that remittances and exchange rate are key drivers of economic growth in Nigeria. And recommends for policies that could increase and sustain diaspora remittances to the country