Remittances and Financial Sector Development in Nigeria: An Empirical Dynamic Analysis
DOI:
https://doi.org/10.51137/wrp.ijarbm.307Keywords:
Remittances, Financial Depth, Financial Access, Financial Efficiency, ARDLAbstract
Remittance inflow is expected to improve financial sector development in destination countries, although its effects may vary across different dimensions such as depth, access, and efficiency. Therefore, this study investigates the dynamic impact of remittances on financial sector development in Nigeria, covering the period 1981 to 2021. Employing the Autoregressive Distributed Lag (ARDL) methodology, the findings revealed that, in the short run, remittances negatively influence financial development, with a statistically significant effect only on financial depth. However, in the long run, remittances significantly enhance financial access and marginally improve financial depth, while their negative effect on financial efficiency remains statistically insignificant. Furthermore, GDP growth consistently promotes financial development in both the short and long run. Exchange rate depreciation supports financial development in the short run but exerts a negative influence over time. Inflation is found to have no significant effect on financial development across both time horizons. Based on these results, the study recommends policies aimed at formalising remittance channels, promoting financial literacy, leveraging economic growth for inclusive financial access, ensuring exchange rate stability, and implementing structural reforms to support long-term financial sector development.
References
Adekunle, I. A., Tella, S. A., Subair, K., & Adegboyega, S. B. (2022). Remittances and financial development in Africa. Journal of Public Affairs, 22(3), e2545.
Aja, N., Nnaji, F., & Okorie, V. (2024). Diaspora remittances inflows and Nigeria’s socio-economic development in the 21st century. African Journal of Politics and Administrative Studies, 17(1), 173–190. https://doi.org/10.4314/ajpas.v17i1.9.
Antwi, F., Kong, Y., & Gyimah, K. N. (2024). Financial inclusion, competition and financial stability: New evidence from developing economies. Heliyon, 10(13).
Atem, G. G. (2022). Remittances and financial development in Kenya: An autoregressive distributed lag approach. African Journal of Economics and Sustainable Development, 5(1), 95-108.
Azizi, S. (2020). Impacts of remittances on financial development. Journal of Economic Studies, 47(3), 467-477.
Basnet, H. C., Koirala, B., Upadhyaya, K. P., & Donou-Adonsou, F. (2021). Workers’ remittances and financial development: The case of South Asia. International Review of Economics, 68, 185-207.
Bello, O. A. (2024). The role of data analytics in enhancing financial inclusion in emerging economies. International Journal of Developing and Emerging Economies, 11(3), 90-112.
Bindu, S., Sridharan, P., Swain, R. K., & Das, C. P. (2022). Causal linkage between remittances and financial development: Evidence from the BRICS (Brazil, Russia, India, China, and South Africa). Journal of East-West Business, 28(2), 117-149.
CBN (2020). Governor's remarks diaspora remittances. httpsss://www.cbn.gov.ng/Out/2020/CCD/Governor’s%20Remarks%20Diaspora%20Remittances.pdf.
Central Bank of Nigeria (CBN). (2022). Annual report on remittance inflows.
Damilola, A. O. (2022). FinTech and financial inclusion in west Africa: Nigeria’s smes market. International Journal of Multidisciplinary and Current Educational Research, 4, 210-2018.
Das, A., & McFarlane, A. (2022). Non‐linear relationship between remittances and financial development in Jamaica. International Migration, 60(3), 242-260.
Deheri, A. (2022). The nexus between remittance inflows and financial development in India: substitutes or complements? The Indian Economic Journal, 70(4), 597-614.
Demirgüç-Kunt, A., Klapper, L., Singer, D., Ansar, S., & Hess, J. (2018). The global findex database 2017: Measuring financial inclusion and the fintech revolution. World Bank. https://doi.org/10.1596/978-1-4648-1259-0.
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.
EFInA. (2020). Access to Financial Services in Nigeria Survey.
IFAD. (2022). Sending money home: The role of remittances in financial inclusion.
Ikpesu, F., Akinola, A., & A. Ikpesu, O. (2022). Remittance flows and banking sector development in emerging markets: do institutions matter? Journal of Transnational Management, 27(2), 85-96.
Kaya, O. (2024). The impact of late payments on SMEs’ access to finance: Evidence from credit rationing and loan terms. Economic Modelling, 141, 106896.
Keho, Y. (2020). Impact of remittances on financial development: Revisiting the evidence for ECOWAS countries. Theoretical Economics Letters, 10(1), 169-179.
Khan, F. U., Nouman, M., Negrut, L., Abban, J., Cismas, L. M., & Siddiqi, M. F. (2024). Constraints to agricultural finance in underdeveloped and developing countries: a systematic literature review. International Journal of Agricultural Sustainability, 22(1), 2329388.
Khan, I. (2024). Policy pushes, prices, and people: Unveiling drivers of global remittance inflows. Journal of the Knowledge Economy, 1-25.
Kudaisi, B. V., Ojeyinka, T. A., & Osinubi, T. T. (2022). Financial liberalization, remittances and economic growth in Nigeria (1990–2018). Journal of Economic and Administrative Sciences, 38(4), 562-580.
Miao, M., & Qamruzzaman, M. (2021). Does remittances matter for openness and financial stability: Evidence from least developed economies. Frontiers in Psychology, 12. https://doi.org/10.3389/fpsyg.2021.696600
Obayagbona, j., & Osasogie, E. O. (2024). Foreign remittances inflows, official development assistance and financial markets development in Nigeria. African Development Finance Journal, 7(5), 146-172.
Ofori, I. K., Gbolonyo, E. Y., Dossou, M. A. T., Nkrumah, R. K., & Nkansah, E. (2023). Towards inclusive growth in Africa: Remittances, and financial development interactive effects and thresholds. Journal of Multinational financial management, 68, 100798.
Okolie, P. I. P., Osam, M., & Ezeamama, M. C. (2023). Impact of exchange rate on foreign reserves and diaspora remittances in Nigeria: 2015–2022. European Review in Accounting and Finance, 7 (1), 1-17. DOI: https://doi. org/10.5281/zenodo, 7682496.
Osei-Gyebi, S., Opoku, A., Lipede, M. O., & Kemmoe Kountchou, L. (2023). The effect of remittance inflow on savings in Nigeria: The role of financial inclusion. Cogent Social Sciences, 9(1), 2220599.
Prempeh, K. B., Kyeremeh, C., & Danso, F. K. (2023). The link between remittance inflows and financial development in Ghana: Substitutes or complements? Cogent Economics & Finance, 11(2). https://doi.org/10.1080/23322039.2023.2237715
Ratha, D. (2020). The impact of remittances on economic growth and poverty reduction. World Bank.
Udo, O. O. (2022). Financial strategies for sustainability of small-and medium-sized enterprises in Nigeria (Doctoral dissertation, Walden University).
Virak, K., & Bilan, Y. (2022). The role of formal and informal remittances as the determinants of formal and informal financial services. Equilibrium. Quarterly Journal of Economics and Economic Policy, 17(3), 727-746.
World Bank. (2023). Migration and development brief 39: Remittances remain resilient but are vulnerable to risks. https://www.worldbank.org/en/topic/labormarkets/brief/migration-and-remittances
Downloads
Published
Issue
Section
License
Copyright (c) 2025 Christopher Ikechuckwu Ifeacho (Author)
This work is licensed under a Creative Commons Attribution 4.0 International License.
