THE RELATIONSHIP BETWEEN REMITTANCE NET FLOWS AND ECONOMIC GROWTH IN NIGERIA

THE RELATIONSHIP BETWEEN REMITTANCE NET FLOWS AND ECONOMIC GROWTH IN NIGERIA

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CHAPTER ONE

1.1 Background to the Study

Migration has become an important strategy for household subsistence. Through migration, households have boosted their welfare level due to the remittances that migrants send back home to their families. Remittances have also become significant private financial resources for individuals in countries of origin of migrant (UNCTAD, 2011). The magnitude of remittance flow usually affects both the host and the receiving countries. For the host countries, remittance is seen as outflow while, the receiving country, see it as inflow. The net flow of remittances in any nation shows how that country has gained from liberalization. Remittances allow households the opportunity to diversity their income source, hence hedge against risk and increase their


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economic wellbeing (Nyarko and Kwabena, 2010). In doing this the net flow of remittances becomes a source of increasing economic capita growth rate of any country.

In Africa, Nigeria, as the most populated country, plays a key role in its migrations. She has become increasingly involved in international migration to Europe, the Gulf countries and South Africa, yet Nigeria is also a source and destination country migration within west-Africa (Adepoju,A.Van Naerssen,T and A Zoomers,2006). Considering the key role Nigeria plays in African migration systems, its role as destination, transit and source country, and considering the fact that it is both confronted with the negative and positive dimensions of migration; improved systematic insight in the views and interests of Nigerian state and non-state stakeholders is essential in designing more effective migration and economic capita growth (Afaha, 2011).

On the other hand, Remittances have become significant private financial resources for households in countries of origin of migration although they cannot be considered as a substitute for foreign direct investment (FDI), official development assistance (ODA), debt relief or other public sources of finance for growth. Evidence from the World B1ank Migration and Remittance Factbook (2011) shows that in Africa, Nigeria was ranked sixth and fifth in emigration and immigration respectively. This shows that the net flow of remittance as well as the liberalization and total remittance of earning prevalent in the country will be of major source of concern for the Nigeria.

Evidence from World Bank Development Indicators (2007), shows that the stock of Nigerian emigrants in some selected developed countries from 1977 to 2008 shows that Nigerians emigrated more to Italy from 1977 to 2005, except between 1990 to 1995 where US toppled for a while. The dominance of the destination of Nigerian emigrants to US also resurfaces again between 2005 to 2008 as can be seen below on table 1,1.

Table 1.1. Stock of Nigeria Emigrants in selected developed countries


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Source: Computed underlying data from immigration statistics yearbooks of Canada, & UK, the US Statistical Abstract and World Bank Development Indicators (2007).

Similarly, the immigration of foreigners into the country has also been on the increase. Evidence from Afaha, (2011) shows that most of the immigrants in the country mostly those from Africa which greater part of them where from neighbouring West African countries has been on the increase. This shows that Nigeria is indeed a country of source and receiver of remittances and migration.

Just like emigration and immigration, inflow and outflow (net flow) of remittances have also been on the increase and has equally become positive. The table below shows the periods of negative net flows and when net remittance flow became positive in Nigeria. The table showed a clear picture of the inflow, outflow and net flow of remittances in the country, and it shows that not until 1990 that Nigeria had her first positive remittance net flow. But since 1990, the remittance net flow has been positive. What this means is that the size of remittance inflow into the country has toppled the size of outflow. This could equally be seen below on table 1.3.

Table 1.2. Table of remittance inflow, outflow and negative net flow of Nigeria.


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Source: Researchers computation.

Table 1.3 Table of remittance inflow, outflow and positive net flow of Nigeria.

Source: Researchers computation.

Despite the rising positive net remittance flow in Nigeria, the size of the country’s economic capita growth is still very low when compared to her counterpart. For instance, the nation’s economic capita gross domestic product (GDP) has not fared well when Nigeria is compared with other countries in Africa aspiring to be among the top economies in the world. Evidence from CIA World Factbook (2012), showed that in 2011, Nigeria was ranked 177th in the world and 17th


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