Remittances and the Growth of the Nigerian Economy

Abstract

The study investigated the contributions of foreign remittances on economic growth in Nigeria from 1980 to 2016, using the Vector error correction modelling (VECM) technique to analyze the long run and short run impact of disaggregated remittances that is Migrants ’Remittances and Workers’ Remittances to find out whether they will perform differently in relation to economic growth in Nigeria. The two components of remittances performed differently. While the Migrants remittance component exhibits a long run positive, statistically significant relationship with economic growth, the other component i.e Workers Remittance has a negative statistically significant impact in the long run, short run relationship was also established among the variables as the ECM term was negative and statistically significant. The results showed a unidirectional causality from GDP per capita to Migrants remittances while no causality was found between workers’ remittances and gross domestic product per capita. The study therefore recommends the need to strategically harness the contribution of workers’ remittances by ensuring that the money is spent on locally produced goods instead of imported goods so as to ensure a positive relationship with economic growth in Nigeria. The study hereby concludes that remittance is a major driver of economic growth in Nigeria.