Remittances and Financial Sector Development in Nigeria: An Empirical Dynamic Analysis

Remittance inflow is expected to improve financial sector development in destination countries, although its effects may vary across different dimensions such as depth, access, and efficiency. Therefore, this study investigates the dynamic impact of remittances on financial sector development in Nigeria, covering the period 1981 to 2021. Employing the Autoregressive Distributed Lag (ARDL) methodology, the findings revealed that, in the short run, remittances negatively influence financial development, with a statistically significant effect only on financial depth. However, in the long run, remittances significantly enhance financial access and marginally improve financial depth, while their negative effect on financial efficiency remains statistically insignificant. Furthermore, GDP growth consistently promotes financial development in both the short and long run. Exchange rate depreciation supports financial development in the short run but exerts a negative influence over time. Inflation is found to have no significant effect on financial development across both time horizons. Based on these results, the study recommends policies aimed at formalising remittance channels, promoting financial literacy, leveraging economic growth for inclusive financial access, ensuring exchange rate stability, and implementing structural reforms to support long-term financial sector development.