REMITTANCES FINANCIAL DEEPENING AND ECONOMIC PERFORMANCE IN NIGERIA

Abstract

Despite the increasing importance of remittances in total international capital flows, the relationship between remittances and growth has not been adequately studied. This study tests the hypothesis whether remittances affect growth, in particular how domestic credit to private sector development influences a country’s capacity to take advantage of remittances in Nigeria. Using unit root, co integration tests and the Error Correction (ECM) methodology, estimates suggest that remittances have a positive and significant effect on economic growth in Nigeria. The interacting relationship of remittances with a financial deepening variable reveals that these two variables are complement and, moreover, that the impact of remittances is more pronounced within a functional financial deepening variable. The study recommends that more appropriate macroeconomic framework should be developed to assist in improving its financial development and create appropriate infrastructure to complement investments out of remittances.