Impact of Exchange Rate on Foreign Reserves and Diaspora Remittances in Nigeria: 2015 – 2022
- Post by: eraf
- January 31, 2023
- Comments off
Nigeria as Africa’s leading economy and an emerging country has huge potentials for diaspora remittances as they are spread all over the world. They are amongst the most educated and entrepreneurial migratory groups with their median household incomes standing at $62,351 compared to the US national income average of $57,617 as of 2015. However, despite the phenomenal increase in diaspora remittances to Nigeria, the exchange rate and the huge foreign exchange reserves have not benefitted the financial stability of Nigerian families. In view of the above, this study sought to empirically investigate the impact of foreign exchange rate on foreign exchange reserves and diaspora remittances received in Nigeria for the period, 2015 – 2022. The specific objectives are to investigate the impact of foreign exchange rates (FER) on the foreign reserves (FOR) and to examine the impact of foreign exchange rates (FER) on diaspora remittances (DPR) of Nigeria, for the period under review. We employed ex-post facto research design, gathered all the relevant data from the Central Bank of Nigeria (CBN) for the period 2015 – 2022 and utilized multiple regression equation for this study. We adopted the ADF model to address the Unit root issues and then employed the dynamic ARDL model bounds tests to regress the dependent variable on the two independent variables. Ramsey regression error specification test was used to determine whether there is a functional form misspecification in the ARDL model used and we found that the model is correctly specified. From our study, we found that Foreign Exchange Rates have mixed effect on Foreign Reserves and Diaspora Remittances in Nigeria for the period, 2015 -2022 and concluded that the Nigerian economy has been bedeviled by several issues that require appropriate macro-economic policy remediation which should be addressed by adopting all or some of the recommendations adduced. We therefore recommend that the apex regulatory institution in Nigeria (CBN) should ensure the involvement of larger numbers of banks and other financial institutions in the inward transfer of diaspora remittances, among others.
Keywords: Exchange Rate; Foreign Reserves; Diaspora Remittances; Nigeria
Authored by: Okolie, P. I. P., Osam, M. & Ezeamama, M. C.
FULL PDF | DOI: 10.5281/zenodo.7682496