Inflation Rate, Exchange Rate, Remittances Inflows and Economic Performance in Nigeria: A Granger Causality Approach

Abstract

This study empirically investigated the impact of inflation rate, exchange rate and remittances inflows on the economic performance of Nigeria using time series data from 1960 to 2018. The study employed econometric techniques such as the Augmented Dickey Fuller (ADF) unit root test, correlation statistics, granger causality testand the ordinary least squares multivariate regression methods to analyze the data. The study finding showed that remittances inflows are a major driver of economic activities and growth in the Nigeria clime. Exchange rate exerted a positive impact on gross domestic product per capita growth in Nigeria. Both remittances inflows and exchange rate maintained a bi-directional causality with the performance of economy of Nigeria. The study concludes that remittances inflows have a correlation with monetary policy transmission mechanisms towards enhancing the performance of the economy of Nigeria. It is therefore recommended that the government needs to create investors’ friendly environment capable of encouraging migrants to channel their resources into the economy. This will help to boost economic activities, reduce unemployment rate, increases savings, with the end goal of engendering economic performance of Nigeria. To reduce the effect of Inflation in Nigeria, this study suggests that the policy monetary authority (CBN) needs to come up with a policy framework that can enhance the country’s capital stock instead of expending it.