Macroeconomic Drivers of Remittances and the Implication for Economic Growth in Nigeria

Abstract

Remittances have been one of the officially recorded sources of international flows, especially, to developing economies like Nigeria, hence the need to encourage its consistent flow as well as defining ways and means of redeploying it for an improved economy. Following this line of reasoning, an attempt was made in this study, to see whether the macroeconomic environment in the domestic economy can actually play a role in stimulating international remittance inflows. To achieve this, average remittance data were tested against that of per capita income, real exchange rate, trade openness, government expenditure, inflation rate and the demographic variable (population density), and the data were all from secondary sources (WDI and CBN Bulletin, 2017/2018). Drawing from the type of gravity model suggested by Greenwood (1975) and Borjas (1987, 1989) – as modified - for analyzing international migration, and exploring the two approaches to international remittances analysis – altruistic and investment approaches, the data were modelled and estimated. Error Correction Mechanism (ECM) was employed in estimating the model. The results indicated that the macroeconomic environment of Nigeria, plays a significant role in stimulating international remittance flows. Based on the outcome of this study, it is suggested that for consistent flow of remittances into Nigeria, especially for investment purposes, a conducive macroeconomic environment should be created and maintained, as this will not only stimulate inflows, but will aid effective redeployment of same for output growth.