Migrant Remittances and Economic Growth in Nigeria: Evidence from ARDL Analysis (1990-2023)

Abstract

Money transferred by migrants in their host nations back to their home countries is known as remittances, and it is a source of external financing. Remittances are important because of the role they play in receiving economies. Remittance statistics have been rising, and Nigeria's economic growth has remained a contentious issue, particularly in recent years as the country has seen negative trends or a slow growth rate. Migration has increased due to rising levels of insecurity, economic uncertainties, and porous borders that encourage the movement of human and economic resources. This study empirically investigates the impact of remittances on Real GDP in Nigeria. Using annual time series on real GDP, remittances, foreign direct investment, nominal exchange rate, and inflation rate from 1990–2023, which were obtained from the World Bank Database and the Central Bank of Nigeria, the study investigated the effect of migrant remittance inflow on economic growth in Nigeria. As a result, the research used the ARDL for regression analysis and discovered that, while not statistically significant at lags 1 and 3, In the Short term, remittances showed a negative association with Nigeria's real GDP while in the long term, there is a statistically significant and positive correlation with economic growth.  Furthermore, there has been a short-term negative correlation between Nigeria's RGDP and foreign direct investment (FDI), however this association is not statistically significant.  Nonetheless, the factors in question have a favorable long-term association.  Furthermore, the nominal exchange rate has shown a negative relationship with Nigeria's RGDP at all lags, but there is a positive relationship at lag 2. Inflation also has a negative relationship with economic growth in the short and long terms, but this relationship is statistically significant in the long term.  Inflation with a calculated absolute t-value of 1.018080 is less than the tabulated absolute t-value of 1.701 which results resulting to in rejecting the alternative hypothesis that inflation have has a significant impact on Real GDP in Nigeria.   This is consistent with a statistically significant negative long-term connection with economic growth during the studied period.  Because remittances might result in inflationary pressures and decreased labour force participation if they are not used efficiently, the research suggested that the government create targeted initiatives to direct remittances toward productive investments rather than consumption. In order to control currency rate volatility, encourage export development, and draw in foreign investment, the government should concentrate on keeping sufficient foreign exchange reserves and using monetary policy instruments.