Effect Of Cross-Border Payments On Economic Development In Nigeria

Abstract

There is a growing recognition of the dynamics of human and capital migration in developing countries, which have accentuated debates on the nexus and effect of cross-border payments on economic development, especially in Sub-Saharan African economies. In response to this current interest, this paper evaluated the effects of remittances on the economic development of Nigeria using data spanning from 1981 to 2022. This study finds theoretical leaning from the   Keynesian Harrod-Domar model (HDM), which posits that economic growth depends on the amount of capital available for investment and that the rate of capital accumulation is proportional to the savings rate. The GDP per capita was used to measure economic development, while remittances were Given the inclusion of financial development, real exchange rate, and financial openness as moderating variables, it was observed that cross-border payments generally exerted varying effects on economic development. The study showed that personal remittances had a positive and statistically significant on the economic development of Nigeria. Also, the compensation to employees had a negative and non-significant effect on the economic development of Nigeria. However, personal transfers were found to be the dominant aspect of remittances that exerted significant effects on economic development. Based on the findings, it was recommended that the governments of Nigeria create and ensure a favorable investment climate for remittances to be invested by initiating policies that subsidize the cost of remittance transfers to the recipient and introducing tax exemption for remittance income.