The effect of remittances on economic growth of Nigeria

Abstract

This study is conducted to investigate the impact of foreign remittances on economic growth of Nigeria using annual time series data from 1981–2019. The data used for the study were collated from the World Development Indicators of the World Bank. Economic growth was measured by real gross domestic product (RGDP) of Nigeria. In order to explore the effect of remittances on economic growth, multiple regression analysis based on the Autoregressive Distributed Lag (ARDL) model was utilized. From the ARDL bounds test, it was found that remittances and economic growth was bound by a long-run relationship. The long-run and short-run estimates showed that remittances had a negative and significant effect on economic growth in Nigeria after controlling for FDI, gross fixed capital formation, inflation and exchange rate. The study also revealed that FDI and gross fixed capital formation had a positive and significant effect on economic growth while inflation and exchange rate had a negative and significant effect on economic growth in the long-run. In the short-run, amidst negative and significant effect of remittances, FDI had a positive and significant effect on economic growth while gross fixed capital formation and inflation were found positive but insignificant and exchange rate having a negative and significant effect on economic growth of Nigeria. So, it was concluded that the effect of remittances is, though negative but significant in explaining the changes in economic growth of Nigeria.