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Remittance Inflows and Exchange Rate Management in Nigeria

EKERE, Edobot Udo CHUKWU, Sancho N. PhD

Abstract

This paper investigates the impact of remittance inflows on exchange rate management in Nigeria over the period 1990–2025. Personal Remittance Received, Personal Transfers Received, Compensation of Employee Received and Inflation Rate were used as a surrogate for remittance inflows while external reserve was used as a proxy for exchange rate management. Secondary data were sourced from the World Bank World Development Indicator WDI) 2025.The Augmented Dickey-Fuller unit root test was employed to examine the stationarity properties of the variables, while the Auto-Regressive Distributed Lag model was utilized to estimate both short-run and long- run dynamics. The bounds testing approach confirms the existence of a long-run relationship among the variables. Empirical findings reveal that personal remittance received had a positive and significant relationship with external reserve while personal transfer received and compensation of employees had a negative but significant relationship with external reserve. However, inflation rate had a positive but insignificant relationship with external reserve. Hence, it was concluded that remittance inflows had a substantial impact on exchange rate management in Nigeria. It was recommended that the Central Bank of Nigeria should formulate policies that encourage and formalize personal remittance inflows through official financial channels. This can be achieved by improving foreign exchange incentives, reducing transfer costs, and strengthening diaspora banking services in order to enhance foreign exchange availability and macroeconomic stability in Nigeria

Keywords

Personal Remittance ReceivedPersonal Transfers ReceivedCompensation of Employee ReceivedInflation Rate e External Reserve

References

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