THE RELATIONSHIP BETWEEN REMITTANCE NET FLOWS AND ECONOMIC GROWTH IN NIGERIA

THE RELATIONSHIP BETWEEN REMITTANCE NET FLOWS AND ECONOMIC GROWTH IN NIGERIA

ABSTRACT

This study investigated the impact of remittance netflow on per capita growth and also examined the transmission of structural shocks from remittance netflows to economic capita growth in Nigeria The impulse responses and variance decomposition computed from the VAR estimates are used to  ascertain  the reaction of economic capita growth to remittance net-flow and dynamic effect of shocks on the endogenous variables: remittance net-flow[REM], exchange rate[EXC], exchange regime dummy[EXR], inflation[INF], foreign direct investments[FDI]. The result rof the Two Stage Least Square (2sls) showed that the independent variables in the models explained the dependent variable to a reasonable extent. Remittance net-flow and exchange rate regime dummy has significant impact on economic capita growth in Nigeria. The impulse response result showed that the shocks transmitted by REM,EXC,INF and FDI increased economic growth  per capita, except shocks from EXR dummy which were mostly negative in the periods. The result from forecast error variance decomposition showed that the predominant sources of variation in economic growth were from exchange rate regime, remittance netflow and foreign direct investment. The paper, therefore, recommend among others, the removal of unnecessary restrictions in the movements especially when it involves the movement of her nationals to places where most of the remittance inflows comes from.