Abstract

There has been a massive inflow of diaspora remittances into the Nigerian economy in recent times. However, there are concerns over whether or not inward remittances have any significant effect on the banking sector development in Nigeria. This study sought to: (i) examine the trend of household inward remittances and banking sector development in Nigeria; (ii) analyse the effect of inward remittances on banking sector development in Nigeria. Annual time series data were sourced from World Development Indicators (WDI) (2015) edition of the world bank for the period 1977 – 2014. We employed both descriptive statistics in the form of graph and Generalised Method Moment instrumental variables (GMM-IV) estimator to examine the inward remittances - banking sector development nexus Nigeria. Results show that inward remittances have positive but statistically insignificant effect on banking sector development in Nigeria (β =0.0727; t =0.5165). It is therefore recommended amongst others , that Nigerian banks develop remittance-linked financial products for Nigerians in Diaspora and remittance recipient households instead of treating remittance as a one-off transaction without value addition.

Highlights

  • Household inward remittances as private monetary transfers by migrants to their home countries have increased substantially since 2005

  • DLCPS is expressed as a function of a period lagged value of the dependent variable (DLCPS(-1)) natural logarithm of inward remittances as a ratio of GDP (DLREM), natural logarithm of broad money supply (DLM2), inflation rate (DINF) natural logarithm of trade openness measured as the ratio of the sum of import and export logarithm of lending rate (DLENDR)

  • This study examined the impact of household inward remittances on banking sector development and economic growth in Nigeria

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Summary

Introduction

Household inward remittances as private monetary transfers by migrants to their home countries have increased substantially since 2005. Inward remittances to developing countries reached $430bn in 2011 from $333bn in 2010(World Bank 2012). World Bank(2013) forecasts that it would increase to about $500bn by 2015. Remittance inflow into Nigeria has surpassed other foreign exchange flows like Foreign Direct Investment (FDI) and Official Development Assistance (ODA) both in absolute terms and as percentage of GDP (World Bank, 2012). Remittances have been receiving research attention from both people in academics and policy makers. This increased research attention could be attributed to empirical evidences suggesting that inward remittances remain an important source of investment finance for individuals and families to cope with poverty and economic crisis

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