ABSTRACT

This study investigated the relationship between remittances and economic growth in Nigeria between the periods 1981 to 2019.The main objective of the study is to examine the nexus between fluctuations in remittance inflow and economic growth in Nigeria. Employing ARDL to determine the long-run and short-run relationship, the study found that there is cointegration amongst the variables. The result showed that remittances do not promote economic growth both in the long-run and short-run. This indicates that remittances are mostly spent on consumption and not on productive investment that would engender economic growth. In this study, there is heterogeneity among the data series. Endogeneity problem is therefore expected in the models if the OLS technique is employed. This is a clear justification for the adoption of the dynamic method of estimation (i.e., the dynamic OLS). The correlation matrix also showed that growth rate in output (Y) is positively correlated with, investment, remittances and trade openness, while it is negatively correlated with growth rate of fiscal deficits of borrowing, inflation rate, interest rate and remittances growth. Overall, growth rate of fiscal deficits of borrowing and inflation rate are negatively correlated with the private consumption in domestic market, private sector investment and growth rate of output. Finally, the coefficient of inflation and trade openness are negatively signed and individually significant at the 1 per cent level; an indication that rising inflation rate (a symptom of macroeconomic instability and uncertainty) has a detrimental effect on economic growth in Nigeria. Without doubt, accelerating inflation has a destabilizing effect on economic growth as it engenders uncertainty and instability in the macroeconomic and investment environment. Arising from the foregoing findings, the study recommends amongst others that, the federal government should adopt strict policy measures to regulate international remittance inflows to Nigeria by ensuring proper investment of greater percentage of all remittances.