Remittance and Poverty Reduction in Nigeria

Further Evidence from Nigeria

Abstract

Nigeria is the sixth highest recipient of remittances globally, and only second to Egypt in Africa. Yet, successive World Bank Annual Economic reports continue to rank the country among the poorest in the world. This paper examined the impact of remittances on poverty reduction in Nigeria from 1986-2021 using the error correction model (ECM) analytical technique. Based on the neo-classical theory of poverty and migration, the independent variables used in this paper include remittance inflow, real gross domestic product per capita, foreign direct investment, financial market access, trade openness, and inflation rate. Data for this paper were sourced from the Central Bank of Nigeria (CBN) Statistical Bulletin of various issues, and the World Bank Development Indicator (WDI). The paper showed that a unit increase in remittances results to 0.1138 unit decrease in poverty rate. Also, real gross domestic product per capita, foreign direct investment and financial market access, all have negative relationships with poverty rate, decreasing poverty rate by 41.39, 0.399 and 0.0312 units respectively. Meanwhile, inflation has a negative relationship with poverty rate, while trade openness has a positive relationship with poverty rate. The result also showed that the error correction model suggested an adjustment rate of 7.57% of the model to long-run equilibrium. The paper recommended among others, the use of our consular offices abroad to regularize the resident status of Nigerian illegal migrants and channeling remittances of such migrants formally to Nigeria.