Empirical Investigation of the Nexus Between Remittance Inflows, Financial Development, and Economic Growth in Nigeria

This study empirically investigates the tripartite nexus between remittance inflows, financial sector development, and economic growth in Nigeria, addressing an important gap in the development finance literature regarding the conditions under which remittances translate into productive investment rather than consumption expenditure. Nigeria consistently ranks among the top global remittance recipients, with annual inflows exceeding 20 billion US dollars in recent years, yet the macroeconomic growth impact of these flows remains empirically contested. The study employs an econometric research design using annual time series data from the World Bank, Central Bank of Nigeria, and IMF for the period 2000 to 2023. An Autoregressive Distributed Lag bounds test framework is applied to estimate the long-run and short-run relationships among remittance inflows, financial development indicators, and real GDP per capita growth, with Granger causality analysis determining directional relationships. The theoretical framework draws on the financial intermediation theory, the Dutch disease model applied to remittances, and the endogenous growth theory. The study introduces financial development as a conditioning variable, testing the hypothesis that remittances contribute more effectively to growth in periods of deeper financial development when recipients can channel inflows into productive investments through formal financial instruments. Findings are expected to confirm a non-linear relationship whereby the remittance-growth nexus strengthens at higher levels of financial development. The study recommends targeted financial inclusion deepening, diaspora savings bond instruments, and digital remittance infrastructure investment as mechanisms to enhance the productive utilisation of Nigeria's substantial diaspora inflows. Keywords: remittances, financial development, economic growth, Nigeria, ARDL