THE IMPACT OF REMITTANCES INFLOW ON THE DEVELOPMENT OF CAPITAL MARKET; THE CASE OF NIGERIA

ABSTRACT

Owing to the rising trend in the volume of remittances inflow to Nigeria, this study investigated the impact remittances inflow plays on the development of capital market in Nigeria for the period spanning 1981 to 2019 using auto-regressive distributed lag (ARDL) model. Based on theory, a model was drawn and it was found that in the short run, remittances positively impact capital market though it was not statistically significant. However, in the long run, remittances exhibited a significant positive impact on capital market. It was also found that capital market adjust speedily (over 60 percent) to equilibrium in the event of any displacement thereof. This was captured by the speed of adjustment coefficient. Also, causality test conducted shows the existence of a unidirectional causality running from remittances to capital market. Recommendations such as implementation of policies that enhanced remittances inflow to Nigeria and that policy should pay keen attention to remittances inflow as a tool of steering the course of the economy were put forward.

Keywords: Remittances, Capital Market, Time series, Nigeria

JEL Classification: F24, G12, C22, N37