REMITTANCES INFLOW AND EXCHANGE RATE MOVEMENT IN NIGERIA

This study analyzes the relationship between remittances and exchange rate movements in Nigeria from
1980 to 2021. It specifically examines the trends in remittances and exchange rates, and investigates the
impact of remittance inflows on exchange rate fluctuations in the country. The importance of this
research stems from the considerable inflow of remittances relative to the size of Nigeria’s economy,
which has led to several adverse effects, including the appreciation of the real exchange rate and the
loss of competitiveness in the tradable sector. To evaluate the effect of remittances on the exchange
rate, the study models the exchange rate as a function of remittance inflows, inflation, and economic
growth. Data spanning from 1980 to 2023 was sourced from the Central Bank of Nigeria (CBN)
Statistical Bulletin and the National Bureau of Statistics (NBS). Diagnostic tests, including the JarqueBera test for normality and tests for multicollinearity, were conducted to assess the time series
properties of the data. The analysis utilized the Fully Modified Ordinary Least Squares (FMOLS)
technique. The findings reveal that economic growth has a significant positive effect on remittances (β =
5.656290, t = 6.511424, p < 0.05), while exchange rate movements (β = -0.119294, t = -0.168559, p >
0.05) and inflation (β = 0.024494, t = 0.978400, p > 0.05) have negligible and statistically insignificant
effects on remittances. Overall, the results highlight that while economic growth significantly boosts
remittances, the exchange rate and inflation do not have a meaningful impact on remittance inflows in
Nigeria. The study recommends that the Nigerian government focus on reducing the cost of sending
remittances to enhance their poverty-reducing potential and encourage a larger proportion of these
remittances to flow through formal financial channels.