Diaspora Remittances and Economic Growth in Nigeria: An ARDL Approach

Abstract

This paper examines the impact of diaspora remittances on Nigeria's economic growth, utilising total remittances and exchange rates as proxies for independent variables, with gross domestic product (GDP) as the dependent variable. The Autoregressive Distributed Lag (ARDL) method was applied to analyse secondary time series data from the Central Bank of Nigeria (CBN) and the World Bank
Development database, covering the period from 1987 to 2021. The results show that, in the long term, remittances from the diaspora have a negative impact on Nigeria's economic growth, although this effect is not statistically significant. Conversely, an unstable exchange rate significantly hinders economic growth. While the benefits of remittances and exchange rate stability to economic development are limited, both factors are beneficial in the short term. Additionally, the impact of remittances varies, exhibiting either positive or negative effects depending on the lag used. Furthermore, the study highlights both short-term and long-term effects of exchange rate volatility on Nigeria’s economic growth. The findings suggest that the Nigerian government should increase investment in infrastructure and improve access to amenities to attract more investors and boost investment levels. It also recommends further research to explore the post-COVID-19 effects of diaspora remittances on Nigeria’s economic growth, considering currency fluctuations.