Migrants’ remittance flows and use in Nigeria

Nigeria is the highest remittance receiving county in the sub-Saharan Africa, posting over US$22 billion in 2017. The huge sum is used based on the discretions of the receiver and or the instructions of the senders. In any case, the macroeconomic implications of the use could be substantial. Conspicuous use of remittances is usually accompanied with macroeconomic instability. Even when it is productively used, it may distort policy targets of the authorities. Thus, this paper seeks to investigate how the major components of spending, that is, private consumption, investment and imports respond to changes in remittances. Employing Generalized Method of Moments (GMM) situated in the macroeconomic model that articulated the various uses of remittances, we find, between 1980 and 2017 that all these components responded positively and significantly to remittances. Meanwhile, out of these three, imports responded faster while investment had the least response. We could not establish whether spending on imports is productive or otherwise since it is composed of both final and intermediate goods. However, received evidence indicates that remittances are spent mostly on the purchase of import final goods. Thus, the use of remittances need to be tuned towards investment so as not to create economic instability, particularly inflation.