The development outcomes of remittance inflows to Nigeria: the case of the Southeastern Geo-political zone

ABSTRACT

Remittances to Sub-Saharan Africa (SSA) constitute a critical lifeline for millions of individual households. It is on record that these large transfers enable recipient households to raise their living standards beyond vulnerability and subsistence levels. Unfortunately, the development potentials of remittance income are seldom factored into most pro-poor targeting programmes in many SSA countries like Nigeria. This is largely due to the problems of data inconsistency as well as those related to lack of precise information on how remittances are received and spent. Using novel survey dataset involving 450 remittance recipient and non-recipient households collected in the Southeast Geopolitical Zone of Nigeria, the study uncovers significant evidence of the impact of remittances on household expenditure and povertyusingpropensityscore matching (PSM). Specifically, households that receive remittances invest between NGN186,000 (US$1,240) and NGN205,000 (US$1,366.7) more in building constructions, land acquisitions and also invest over NGN60,000 (US$400) more in household business enterprise compared to non-recipient households. Similarly, the estimated impact of remittances on poverty shows that household poverty is lower by between 30.3% and 33.6% considering the results from all the three PSM matching estimators. The differences between the recipients and non-recipients are statistically significant. The implications of the findings are discussed in terms of pro-poor targeting programmes in Nigeria.

KEYWORDS:

• Remittances
• motivations
• development outcomes
• propensity score matching
• Nigeria

Acknowledgements

This paper is derived from an IDRC funded-project on international remittances and poverty involving three West African Countries (https://www.idrc.ca/en/project/international-remittances-poverty-and-inequality-case-study-ghana-ivory-coast-and-nigeria).Earlier drafts of the paper benefited from helpful comments and suggestions from Omolara Duke, Aremu Adesola, Stan Ukeje, Yisa Awoyinka, Omoyemi Tunde, Adaeze Molokwu, Adeniji Adeyemo, Dupe Kuteyi, Okey Ibeanu, Sarah Anyanwu and Ebere Uneze. We equally wish to acknowledge the Journal Editor and one anonymous reviewer for the very helpful comments and suggestions.

Disclosure statement

The authors declare that they have no conflict of interests.

Ethical approval

Ethical approval for the study was sort and obtained from the Research Ethics Committee of the University of Nigeria, Nsukka. All procedures performed in the study involving human participants were in accordance with the ethical standards as laid down in the 1964 Declaration of Helsinki and its later amendments.

Informed consent

All participants provided informed written consent.

Notes

1. Defined in the study as a household with a migrant currently away and/or who receive international remittances (I.e., within Africa and outside Africa).

2. Defined in the study as a household with no migrant of either kind, or who do not receive remittances.

3. We used the ‘Recall Approach’ in which case, respondents were asked to report how much they spent on different categories of consumption goods and services in a certain period.

4. This was the actual sample size agreed at the onset of the study for each country that the budget could sustain.

5. It might be possible that households with migrants have certain advantages over non-migrant households in terms of incomes, education, access to information, social networks etc., that influences the likelihood of having a migrant, and in turn, determine the size of migrant earnings at the destination country. If this is so, then a potential selection bias is apparent which means that we cannot directly compare spending between recipients and non-recipients and attribute the differences to remittance income alone. To correct this potential source of bias in the dataset, it is therefore necessarily to use the propensity score matching (PSM) technique. The idea behind PSM is to pair individuals that receive remittances with other individuals that are like them in every other aspect except for remittances so that any observed difference is sorely attributed to remittances (Cox-Edwards & Rodriguez-Oreggia, 2006; Rosenbuam & Rubin, 1983).

Additional information

Funding

This work was carried out with the aid of a grant and scientific support from the International Development Research Center (IDRC), Ottawa, Canada through Research Grant No.: 105034-001.