Impact of Remittance Inflows on Financial Inclusion in Nigeria

Joel Edafe; Abidemi C. Adegboye; Monday I. Egharevba; Roland I. Irughe

Joel Edafe Department of Economics, Adeyemi Federal University of Education, Ondo, Nigeria
Abidemi C. Adegboye Department of Economics, University of Lagos, Lagos, Nigeria
Monday I. Egharevba Department of Economics, Adeyemi Federal University of Education, Ondo, Nigeria
Roland I. Irughe Department of Economics, Adeyemi Federal University of Education, Ondo, Nigeria

Keywords: Bank Branches, Bank Deposits, Finance Access, Finance Use, Remittances

Abstract

This study investigates the dynamic relationship between diaspora remittance inflows and financial inclusion in Nigeria over the period 1981 to 2023. Employing a simultaneous equations framework and the Generalised Method of Moments (GMM) estimation technique, the research explores how remittance inflows affect financial inclusion, which is measured by the number of bank branches per 100,000 square kilometers and the volume of bank deposits per adult population. These variables are used to respectively measure access and use of financial services. The study adapted the financial access possibility frontier theoretical framework to develop a model that explains how remittances extend financial access to the initially excluded groups. The empirical analysis reveals that remittance inflows have a significant and positive impact on financial inclusion by enhancing both access to formal banking infrastructure and the use of banking services in Nigeria. Thus, there is evidence that remittances can be leveraged to promote financial inclusion and drive inclusive economic growth in Nigeria. The study therefore advocates for the improved efficiency of remittance channels and better integration of remittance recipients with the formal financial sector to maximise the inclusive benefits of remittances. This outcome would be particularly favourable to the vulnerable and underserved populations since they are expected to benefit more from increased financial inclusion.

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