Migrants’ Remittances, Financial Development and Economic Growth in Nigeria: A Vector Error Correction Model Approach

Femi Michael Nejo
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Femi Michael Nejo: Adekunle Ajasin University, Akungba-Akoko, Ondo-State, Nigeria

International Journal of Research and Innovation in Social Science, 2021, vol. 05, issue 07, 142-147

Abstract: Improvement in economic growth should take note of individual welfare in developing nations like Nigeria. Migrants’ remittance inflow and financial development are both needed to influence such desired growth. This study therefore, examined the effect of migrants’ remittances and financial development on economic growth in Nigeria from 1986-2019. The study obtained secondary data like real-GDP per capita, migrants’ remittance, financial index, real exchange rate and trade openness from Central Bank of Nigeria Statistical Bulletin 2019 and Word Bank Development Indicator, 2019. The Augmented Dickey Fuller (ADF) and Phillip Peron (PP) unit root tests employed confirmed that all the variable identified above were stationary at first level difference. Johansen Co-integration confirmed a long-run relationship among the variables. The lagged error correction (ECM) established that short-run and long-run dynamic was linked at an adjustment speed of 19.0% annually. Migrants’ remittance and trade openness were significant and directly related to real-GDP per capita; while, real exchange rate indirectly related to it. Also, financial index was directly related to it, but non-significant. The study concluded that impact of remittances on economic growth depends on the degree of liberalization of the economy; while exchange rate appreciation depresses it. Therefore, recommended that Nigeria government should put in place policies such as low charges on migrants’ remittance inflows in order to reduce inflow of such remittance through informal channel. Also, government must remove any trade barriers that could affect or reduce any form of free movement of remittance inflow.

Date: 2021
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