Role of Financial Remittances in Promoting Financial Development: Evidence from Nigeria
Abstract
This research aims to investigate whether financial remittances contributed to financial development in Nigeria during the years 1981-2021. The study utilized a combination of descriptive and inferential statistical techniques to analyze the data. It employed Augmented-Dickey–Fuller unit root test, the ARDL bounds test, and subsequent post-estimation examinations. To evaluate the effect of financial remittances on financial development, the current research embraced both bank-related and capital market-oriented indices as indicators of financial development. Descriptive statistics revealed that Nigeria's economic structure leans towards a bank-centred model. Further, in comparison to Foreign Direct Investment (FDI), financial remittances take precedence. The empirical findings confirmed that financial remittances exert a significant influence on financial development over both short- and long-term.
Downloads
References
Acosta, P. A., Baerg, N. R., & Mandelman, F. S. (2009). Financial development, remittances, and real exchange rate appreciation. Economic Review, 94, 1–12. https://doi.org/10.1016/j.jinteco.2009.06.007
Adekunle, I. A., Tella S. A., Subair, K., & Adegboyega, S. B. (2020). Remittances and financial development in Africa. Journal of Public Affairs, 22(3), Article e2545. https://doi.org/10.1002/pa.2545
Ahamed, L. M., & Selliah, S. (2020). Empirical relationship betweenworkers’ remittances and financialdevelopment (an ARDLcointegration approach forSri Lanka). International Journal of Social Economics, 47(11), 1381–1402 https://doi.org/10.1108/IJSE-03-2020-0157
Ahmad, M., Ul Haq, Z., Khan, Z., Khattak, S. I., Rahman, Z. U., & Khan, S. (2019). Does the inflow of remittances cause environmental degradation? Empirical evidence from China.
Economic Research-Ekonomska Istraživanja, 32(1), 2099–2121. https://doi.org/10.1080/1331677X.2019.1642783
Akçay, S. (2020) Remittances and financial development in Bangladesh: substitutes or complements? Applied Economics Letters, 27(14), 1–9. https://doi.org/10.1080/13504 851.2019.1676376
Al Mamun, M., Sohag, K., Samargandi, N., & Yasmeen, F. (2016). Does remittance fuel labor productivity in Bangladesh? The application of an asymmetric nonlinear ARDL approach. Applied Economics, 48(50), 4861–4877. https://doi.org/10.1080/00036846.2016.1167825
Azizi, S. (2018). The impacts of workers’ remittances on human capital and labor supply in developing countries. Economic Modelling, 75, 377–396. https://doi.org/10.1016/j.econmod.2018.07.011
Basnet, H. C., Koirala, B., Upadhyaya, K. P., & Donou-Adonsou, F. (2017). Workers’ remittances and financial development: the case of South Asia. International Review of Economics, 68, 185–207. https://doi.org/10.1007/s12232-020-00359-5
Bhattacharya, M., Inekwe, J., & Paramati, S. R. (2018). Remittances and financial development: empirical evidence from heterogeneous panel of countries. Applied Economics, 50(38), 4099–4112. https://doi.org/10.1080/00036846.2018.1441513
Das, A., & McFarlane, A. (2021) Non-linear relationship between remittances and financial development in Jamaica. International Migration, 60(3), 242–260. https://doi.org/10.1111/imig.12911
Deonanan, R., Ramkissoon, B., Ramkissoon, D., & Hosein, R. (2020). Disentangling the relationship between remittances and financial development: Evidence from Jamaica. International Review of Applied Economics, 34(2), 193–216. https://doi.org/10.1080/02692171.2019.1685954
Donou-Adonsou, F., Pradhan, G., & Basnet, H. C. (2020). Remittance inflows and financial development: evidence from the top recipient countries in Sub-Saharan Africa. Applied Economics, 52(53), 5807–5820. https://doi.org/10.1080/00036846.2020.1776834
Fromentin, V. (2018). Remittances and financial development in Latin America and the Caribbean countries: A dynamic approach. Review of Development Economics, 22(2), 808–826. https://doi.org/10.1111/rode.12368
Golder, U., Rumaly, N., Hossain, M. K., & Nigar, M. (2023). Financial progress, inward remittances, and economic growth in Bangladesh: Is the nexus asymmetric? Heliyon, 9(3), Article e14454. https://doi.org/10.1016/j.heliyon.2023.e14454
Hamma, I. M. (2017). Linking remittances with financial development and institutions: A study from selected MENA countries. Topics in Middle Eastern and African Economies Proceedings of Middle East Economic Association, 19(1), 113–135
Ilo, B., Elumah, L., & Sayanolu, W. A. (2018). Oil rent and financial development: evidence from Nigeria. Ilorin Journal of Finance, 2(1), 152–165.
International Monetary Fund. (2021). Remittances in sub-Saharan Africa: An update. https://www.imf.org/-/media/Files/Publications/covid19-special-notes/en-special-series-on-covid-19-remittances-in-sub-saharan-africa-an-update.ashx
Issahaku, H. (2019). Harnessing international remittances for financial development: the role of monetary policy. Ghana Journal of Development Studies, 16(2), 113–137. https://doi.org/10.4314/gjds.v16i2.6
Kakhkharov, J., & Rohde, N. (2019). Remittances and financial development in transition economies. Empirical Economics, 59, 731–763. https://doi.org/10.1007/s00181-019-01642-3
Kwadwo, B. P., Christian, K., & Felix, K. D. (2023). The link between remittance inflows and financial development in Ghana: Substitutes or complements? Cogent Economics & Finance, 11(2), Article e2237715. https://doi.org/10.1080/23322039.2023.2237715
Maimbo, S. M., & Ratha, D. (Eds.). (2005). Remittances: Development impact and future prospects. World Bank Publications.
Misati, R. N., Kamau, A. & Nassir, H. (2021). The role of remittances in financial development: evidence from nonlinear ARDL and asymmetric causality. Journal of Asian Finance, Economics and Business, 8(3), 0139–0154. https://doi.org/10.13106/jafeb.2021.vol8.no3.0139
Misati, R. N., Kamau, A., & Nassir, H. (2019). Do migrant remittances matter for financial development in Kenya? Financial Innovation, 5(1), 31–47, https://doi.org/10.1186/s40854-019-0142-4
Naceur, M. S. B., Chami, M. R., & Trabelsi, M. (2020). Do remittances enhance financial inclusion in LMICs and in fragile states? International Monetary Fund.
Olayungbo, D. O., & Quadri, A. (2019). Remittances, financial development and economic growth in sub-Saharan African countries: Evidence from a PMG-ARDL approach. Financial Innovation, 5(1), 1–25. https://doi.org/10.1186/s40854-019-0122-8
Orozco, M. (2009). Emerging markets for Rwanda: remittance transfers, its marketplace, and financial intermediation. Doc Player. https://docplayer.net/17075736-Emerging-markets-for-rwanda-remittance-transfers-its-marketplace-and-financial-intermediation.html
Sobiech, I. (2019). Remittances, finance and growth: Does financial development foster the impact of remittances on economic growth? World Development, 113, 44–59. https://doi.org/10.1016/j.worlddev.2018.08.016
World Bank. (2016). World development indicators. https://devdata.worldbank.org/dataonline
World Bank. (2021). World development indicators. https://devdata.worldbank.org/dataonline
World Bank. (2023). World development indicators. https://data.worldbank.org/data-catalog/world-development-indicators
World Economic Forum. (2023). Migrant workers sent home almost $800 billion in 2022. Which countries are the biggest recipients? https://www.weforum.org/agenda/2023/02/remittances-money-world-bank/
World Remit. (2022). Top 10 countries for receiving the most remittances and money transfers. https://www.worldremit.com/en/blog/finance/top-10-remittance-recipients
Copyright (c) 2023 Lucas OKAH Elumah
This work is licensed under a Creative Commons Attribution 4.0 International License.
JFAR follows an open-access publishing policy and full text of all articles is available free, immediately upon acceptance. Articles are published and distributed under the terms of the Creative Commons Attribution 4.0 International License. Thus, work submitted to UMT Journals implies that it is original, unpublished work of the authors; neither published previously nor accepted/under consideration for publication elsewhere. On acceptance of a manuscript for publication, a corresponding author on the behalf of all co-authors of the manuscript will sign and submit a completed Author Consent, Copyright, and Declaration Form.
