Title: Diaspora Remittance Inflow, Financial Deepening and Nigeria's Industrialization
Authors: Ebikabowei Biedomo ADUKU and Ebele Stella NWOKOYE
Volume: 9
Issue: 8
Pages: 166-174
Publication Date: 2025/08/28
Abstract:
This paper examines the impact of diaspora remittance inflow on industrialization in Nigeria from 1980 to 2019 and further investigates how impactful it is on financial deepening. The instrumental variable generalized method of moments (IV-GMM) estimator was employed in analyzing the data. We find a positive but not significant impact of diaspora remittances on industrialization; a negative but not significant impact of diaspora remittances on the ratio of private sector credit to GDP; and a positive and significant impact of diaspora remittances on the ratio of money supply to GDP. The impact of diaspora remittances through the financial sector channel is ineffective and compared with the individual effects, there was no evidence of higher interaction effect of financial deepening, indicating the inefficiency of the financial system in effectively transforming mobilized deposits to investment activities that will enhance Nigeria's industrialization process. Our control variables such as domestic investment, trade openness and population growth had positive impacts on industrialization. We therefore recommend that financial development policies aimed at reducing transaction and liquidity constraints in Nigeria's financial system should be encouraged. This will improve domestic credit to the private sector and hence facilitate Nigeria's industrialization process.