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Financial liberalization, remittances and economic growth in Nigeria (1990–2018)

Bosede Victoria Kudaisi (Department of Economics, Adekunle Ajasin University, Akungba-Akoko, Nigeria)
Titus Ayobami Ojeyinka (Department of Economics, Obafemi Awolowo University, Ile-Ife, Nigeria)
Tolulope Temilola Osinubi (Department of Economics, Obafemi Awolowo University, Ile-Ife, Nigeria)

Journal of Economic and Administrative Sciences

ISSN: 1026-4116

Article publication date: 29 March 2021

Issue publication date: 1 December 2022

225

Abstract

Purpose

International remittances are an important segment of external financial flows in Nigeria, currently superseding official development aid (ODA) in terms of volume, and foreign direct investment (FDI) in terms of stability. This study is motivated by the recent increase in remittance flows in Nigeria as the highest recipient in West Africa, and the fact that the growth impact of remittances is weak within the country. The financial liberalization index developed by Chinn and Ito (2006) is employed in this study to examine the role of financial liberalization in the remittances-growth nexus in Nigeria over the period 1990–2018.

Design/methodology/approach

To address the possibility of endogeneity among the variables in the model, the study employs the generalized method of moments (GMM) as a technique of analysis.

Findings

Remittances and financial liberalization are found to have negative significant impacts on economic growth. However, the effect of the interaction term of financial liberalization and remittances on economic growth is positive and significant. This suggests that the two variables act as complements in the enhancement of economic growth in Nigeria. The study thus concludes that financial liberalization is a strong transmission channel through which remittance inflows positively affect economic growth in Nigeria. The study also advocates for a well-developed financial sector in order to attract more growth-enhancing remittances into the country.

Research limitations/implications

The implication of the research findings is that an unrestrained financial sector is necessary to encourage and optimize the benefits of remittance flows on economic growth in Nigeria.

Originality/value

Previous studies have considered the effects of financial development on the remittances-growth nexus in Nigeria. However, this study examines the role of financial liberalization in the nexus between remittances and economic growth in Nigeria by using the Chinn and Ito (2008) index of financial openness.

Keywords

Citation

Kudaisi, B.V., Ojeyinka, T.A. and Osinubi, T.T. (2022), "Financial liberalization, remittances and economic growth in Nigeria (1990–2018)", Journal of Economic and Administrative Sciences, Vol. 38 No. 4, pp. 562-580. https://doi.org/10.1108/JEAS-09-2020-0164

Publisher

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Emerald Publishing Limited

Copyright © 2021, Emerald Publishing Limited

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