Effects of Remittances on Financial Development in Nigeria

Abstract

The study investigated the effect of remittance on financial development in Nigeria using error correction model (ECM). The study used various banking sector and stock market indicators to capture financial development. The ECM results in all the models showed that the parameters of the error-correction terms in the models were statistically significant and correctly signed as expected. Findings indicated that remittances positively influenced the financial development indicators. Remittances significantly contributed to financial development in Nigeria. The effects of inflation and degree of trade openness on financial sector development (FD) using different financial sector proxy indicators was inconclusive while exchange rate had a positive and significant influence on financial development.