Foreign Remittances, Foreign Aids, Foreign Imports and Economic Growth in Nigeria

Abstract

The paper examined the long-run relationship between external determinants and economic growth in Nigeria, over time series data from the period 1977 to 2014.In this regard, the study used autoregressive distributed lag (ARDL) bound testing approach to test for the presence of cointegration among the variables and vector error- correction model (VECM) was employed to determine the direction of causality. The findings showed that the variables in the study are co- integrated; indicating the existence of long-run relationship among them. The results further suggest that foreign aid has both long-run and short-run positive effect on economic growth, while remittances significantly influence economic growth only in the short-run. Granger causality test revealed the existence of a short-run unidirectional causality running from gross domestic product and remittances to imports. The study therefore recommends that policy makers should take appropriate steps to increase the inflow of foreign aid and remittances through formal financial system which can be diverted into the required productive sectors needed to achieve economic growth.