The Impact of Remittances on Economic Growth in Nigeria: an Error Correction Modeling Approach

This paper investigated the relationship between remittances and economic growth in Nigeria, using an error correction modeling approach for the period 1981 to 2011. Our result revealed that in the long run, remittances impact positively on the economic growth of Nigeria. However, remittances show a significant negative relationship with output in the short run. Also, while foreign aid as an external source of capital have both short and long term significant influence on economic growth in Nigeria, its counterpart FDI can only exert positive impact on RGDP in the short run. Our result also affirmed the significant positive role of trade in promoting economic growth, suggesting that the more open the economy, the more stimuli it has on RGDP both in short run and long run. A policy implication which may be drawn from this study is that Nigeria can improve its economic growth performance, not only by investing on the traditional sources of growth such as investment in physical, foreign direct investment and trade, but also by strategically harnessing the contribution of remittances by ensuring their efficient and reliable transfers.