Impact of remittances and remittance volatility on real effective exchange rate in Nigeria
Loading...
Date
2023-12
Authors
Journal Title
Journal ISSN
Volume Title
Publisher
University of New Brunswick
Abstract
Remittances constitute a major contributor to capital inflow in many low- and middle-income countries. Nigeria receives the highest proportion of the remittances in sub-Sahara Africa (40.2% in 2021). Despite the positive impact of remittances on the recipient households, its impact on the key macroeconomic variables like real effective exchange rate could leave undesirable outcomes for the country through the loss of trade competitiveness. Using the Dynamic Ordinary Least Squares (DOLS) methodology, the study finds that increase in remittances leads to a depreciation of the real exchange rate and shows no evidence of Dutch-disease in Nigeria. This means that increase in remittances into Nigeria does not negatively affect her trade competitiveness in the world market. Furthermore, remittance volatility resulted in appreciation of the real effective rate, although the result is not statistically significant.