Determinants and impacts of migrants' remittances on economic growth in Nigeria from 1988 to 2017

Abstract

This study investigated the impact and macroeconomic determinants of migrants’ remittances on economic growth in Nigeria from 1988 to 2017. Specifically, it identified the macroeconomic determinants of migrants’ remittances; determine the impact of migrants’ remittances on economic growth in Nigeria and also determined the impact of shocks in macroeconomic determinants on remittances in Nigeria. The study made use of secondary data sourced from Central Bank of Nigeria (CBN)’s Statistical Bulletins, National Bureau of Statistics (NBS), World Development Indicators (WDI) and Freedom House on such variables like real gross domestic product, remittances inflow, exchange rate, agricultural gross domestic product, rate of inflation, consumer price index and political right index. The data collected were analyzed using appropriate descriptive and inferential statistics like regression analysis and time series using E-views 9 statistical package. It was observed that gross domestic product, remittances inflow and exchange rate exhibited an increasing trend overtime while trend of inflation rate is seen to be unstable with several crests and troughs. The VECM was estimated to investigate the determinants of remittances in Nigeria during the period. The value (D.W. Statistic = 1.7338) shows that the model is free from autocorrelation problem. Generally, the result shows that the past values of agricultural gross domestic product and exchange rate are positively related to remittances inflow in Nigeria. In addition, the ordinary least square regression analysis revealed that remittances inflow had positive and significant impact on economic growth between 1988 and 2017. The co-efficient of official remittances is seen to be positive at (0.2504) and statistically significant at 1% level (p = 000.1). It means that a unit increase in official remittances raises economic growth by 0.2504. Furthermore, this work shows that foreign aid, foreign direct investment and political right index influence the economic growth during the period. To determine the impact of shocks in macroeconomics determinants on migrants’ remittances in Nigeria, a variance decomposition analysis of forecasting errors was carried out. The result shows that a shock of remittances on itself constitutes a major and significant source of variation declining from 100% in the first period to 94.52% in the second period and declines rapidly to 55.79% in period 10 suggesting that change in migrants’ remittances is persistent. Overall, the result of VECM, impulse response and variance decomposition confirm that agricultural GDP, exchange rate and inflation determine remittances inflow in Nigeria. Finally, the study concludes that migrants’ remittances had positive and significant impact on economic growth in Nigeria.