Remittances and FDI: Drivers of Employment in the Economic Community of West African States

Grace Toyin Adigun (), Abiola John Asaleye, Olayinka Omolara Adenikinju, Kehinde Damilola Ilesanmi, Sunday Festus Olasupo and Adedoyin Isola Lawal ()
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Grace Toyin Adigun: Department of Economics, Bowen University, Iwo 232102, Nigeria
Abiola John Asaleye: Department of Economics, Bowen University, Iwo 232102, Nigeria
Olayinka Omolara Adenikinju: Department of Economics, Bowen University, Iwo 232102, Nigeria
Kehinde Damilola Ilesanmi: Department of Economics, University of Zululand, Richards Bay 3900, South Africa
Sunday Festus Olasupo: Department of Accounting and Finance, Bowen University, Iwo 232102, Nigeria
Adedoyin Isola Lawal: Department of Economics, Bowen University, Iwo 232102, Nigeria

JRFM, 2025, vol. 18, issue 8, 1-17

Abstract: Unemployment and weak economic productivity are significant global issues, particularly in West Africa. Recently, through diverse mechanisms, remittances and foreign direct investment (FDI) have been sources of foreign capital flow that have positively influenced many less developed economies, including ECOWAS (ECOWAS stands for Economic Community of West African States). Nevertheless, these financial flows have exhibited significant inconsistencies, primarily resulting from economic downturns in migrants’ destination countries, with remarkable implications for beneficiary economies. This study, therefore, examines the effect of remittances and FDI on employment in ECOWAS. Specifically, the study assesses the effects of the inflow of remittances and FDI on employment using panel dynamic ordinary least squares (PDOLS) and also investigates the shock effects of remittances and FDI by employing Panel Vector Error Correction (PVECM), which involves variance decomposition. The results show that foreign direct investment (FDI) positively and significantly affects employment. Other variables that show a significant relationship with employment are wage rate, education expenditure, and interest rate. The variance decomposition result revealed that external shocks on remittances and FDI have short- and long-term effects on employment. The above findings imply that foreign direct investment has a far-reaching positive impact on the economy-wide management of the West African sub-region and thus calls for relevant policy options.

Keywords: remittances; foreign direct investment; employment; panel dynamic OLS; ECOWAS (search for similar items in EconPapers)
JEL-codes: C E F2 F3 G (search for similar items in EconPapers)
Date: 2025
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