Financial Development and Remittances Inflow: Evidence from a Panel of Six Countries in the Economic Community of West African States (ECOWAS)

The complexity of the nexus between financial development and remittance inflows in Africa has remained largely underexplored. Therefore, we contributed to the literature by providing more specific and valuable insights into the channels through which financial development affects inward remittances in a panel of six (6) ECOWAS countries (Ghana, Mali, Niger, Nigeria, Senegal, and Sierra Leone). We utilised panel datasets from the World Bank and IMF Financial Statistics and employed the Mean Group (MG) estimator, the Hausman test, and summary statistics for the analysis. The findings showed that the long-term implications of financial institutions' development on remittance inflows are positive. In particular, the effects of financial institution access and efficiency on personal remittances are positive in the long run. This finding indicates that greater access to financial services and efficient, cost-effective allocation of financial resources are beneficial for mobilising personal remittances to the ECOWAS region. Additionally, overall financial development positively affected personal remittances in the long run, being significant at the 5% level, which suggests that gradual and consistent improvements in financial institutions' activities—such as increased access to services, size, efficiency, and stability play an important role in mobilising diaspora remittances to the ECOWAS sub-region. However, the depth of financial institutions has a positive effect on personal remittances. This finding is not significant at the 5% level, indicating that the size of financial institutions relative to GDP has not significantly enhanced the inflows of migrants’ remittances. Based on these findings, we recommend that governments and monetary authorities within ECOWAS collaborate efforts to promote financial development and expand digital financial services, thereby providing a sustainable roadmap for increased remittance inflows.