The Relationship between Remittance Inflows and Economic Performance in Nigeria

Abstract

The nexus between remittance and economic performance is increasingly visible in economic research, with literature pointing to remittance as a significant driver of economic performance. Remittances often represent a stable source of foreign exchange at the macroeconomic level, which strengthens the balance of payments. The study lends empirical support to this nexus.  Having observed the data properties, that some of the data series are stationary while some are non-stationary at levels, the Autoregressive Distributed Model (ARDL) was used in the analysis. The short-run dynamic result shows that remittance inflows increase economic performance, with the impact of remittance inflows enhancing the country's exchange rate. The result also indicates that a higher interest rate dampened economic performance. The study subsequently recommended that remittance recipients investing in capital goods such as machinery should be given a pair of low-interest rates with a subsidised loan. Governments should also integrate a remittance-capital exchange framework through the creation of national funds that pool remittance and capital formation savings together, managed under low-interest regimes hedged against exchange rate volatility. Exchange rate stabilisation backed by remittance reserves to maintain a competitive real exchange rate should be implemented and sustained.