HOUSEHOLD INWARD REMITTANCES AND BANKING SECTOR DEVELOPMENT: THE NIGERIAN EXPERIENCE (1977 – 2014)

Abstract

There has been a massive inflow of diaspora remittances into the Nigerian economy in recent times. However, there are concerns over whether or not inward remittances have any significant effect on the banking sector development in Nigeria. This study sought to: (i) examine the trend of household inward remittances and banking sector development in Nigeria; (ii) analyse the effect of inward remittances on banking sector development in Nigeria. Annual time series data were sourced from World Development Indicators (WDI) (2015) edition of the world bank for the period  1977 – 2014. We employed both descriptive statistics in the form of graph and Generalised Method Moment instrumental variables (GMM-IV) estimator to examine the inward remittances - banking sector development nexus Nigeria. Results show that inward remittances have positive but statistically insignificant effect on banking sector development in Nigeria (β =0.0727;  t =0.5165). It is therefore recommended amongst others , that Nigerian banks develop remittance-linked financial products for Nigerians in Diaspora and remittance recipient households instead of treating remittance as a one-off transaction without value addition.