Finance and Economic Growth in Nigeria: Further Evidence from Diasporal Remittance

This study investigates the relationship between financial inflows and economic growth in Nigeria, with a 
particular focus on diaspora remittances as a complementary and sustainable source of development 
finance. Traditional external financial flows such as foreign direct investment (FDI) and official 
development assistance (ODA) have often proved insufficient or inconsistent due to global economic 
fluctuations, political conditions, and structural limitations. In contrast, remittance inflows have grown 
steadily over the study period, suggesting potential for stimulating economic growth. The study examines 
the contribution of remittances to real GDP growth, alongside bank credit, FDI, ODA, exchange rate 
movements, and inflation, using annual data spanning ten years. Descriptive statistics revealed consistent 
growth in remittance inflows, while FDI and ODA showed volatility over the period. Correlation analysis 
indicated a positive relationship between remittances and GDP growth (r = 0.62), indicating a moderately 
strong association, whereas inflation and exchange rate volatility were negatively correlated with growth 
(r = -0.41 and -0.35, respectively). Ordinary Least Squares (OLS) regression analysis further quantified 
these effects, showing that a 1% increase in remittances is associated with an average 0.28% increase in 
GDP, holding other factors constant. Bank credit contributed positively, especially when directed toward 
productive sectors, while FDI exhibited a statistically insignificant effect due to short-term portfolio 
investments. Inflation and exchange rate volatility exerted statistically significant negative effects on 
economic growth. The findings highlight that diaspora remittances can serve as an effective growth driver 
if channeled into productive investments and integrated within the formal financial system. High transfer 
costs and limited financial sector efficiency reduce the developmental impact of these flows. The study 
therefore recommends policies to deepen financial inclusion, incentivize diaspora investment, stabilize 
macroeconomic conditions, improve transparency in ODA utilization, and attract sustainable FDI.