Abstract:
This study examined the relationship between exchange rate variations and migrants’ remittances to Nigeria. The time-series econometric method of Vector Error Correction (VEC) was applied to estimate the demand-supply equation for remittance transfers. An empirical model that links remittances to its potential determinants was specified and estimated using multivariate Johansen co-integration test and complemented by impulse response and variance decomposition analyses. The key result emanating from the study is that exchange rate variations have a significant effect on remittance transfers to Nigeria. Results also suggest existence of stable long run relationship between remittance transfers and its various determinants and a clear evidence of the positive significant influence of stable exchange rate on inflow of remittance to Nigeria economy. It further revealed that an appreciation of the exchange rate may lead to an increase in transfers and improve household welfare via increase in household consumption expenditure. Results also confirmeda bidirectional causal relationship between remittance transfers and exchange rates. Keywords: Exchange rate variations, migrants’ remittances, Vector Error Correction model, and Nigeria
