The Impact Of International Remittances On Financial Sector Development In Nigeria.

Abstract

Remittance inflow in Nigeria has surpassed that of FDI since 2007, (World Bank ,2011). The increase

in the volume of remittance inflow to Nigeria has generated much interest in terms of knowing what

impact it has on the economy. This work therefore has its focus on determining the impact of

international remittances in financial sector development in Nigeria. It specifically concentrated on

determining the impact of international remittances on financial development and on the causal

relationship between international remittances and financial development in Nigeria. Thus from the

statistical and econometric analysis carried out in the study, it was found that; (1) international

remittances have significant positive impact on financial sector development in

Nigeria,(2)international remittances (REM) cause financial sector development proxieds by the ratio

of credit to private sector to GDP (CPS/GDP) without a feedback while no direction of causality

between international remittances and financial sector development was found when M2/GDP was

used as a proxy and (3) current account balance which was used as a proxy for capital account

openness has a negative impact on financial sector development . Since remittances provide foreign

exchange that is vital to both the internal and the external sectors of the economy, they should be

encouraged via appropriate policy formulation and implementation. Financial intermediaries and

institutions operating in Nigeria should also intensify the mobilization of remittances with the aim of

making them important sources of loanable funds in the country. The study, based on these findings

recommended policies that will improve access to remittances through reduction of remittance

service cost in the financial sector.