Remittance Inflows and Exchange Rate Volatility in Nigeria: A Multivariate Analysis of Macroeconomic Determinants and Institutional Channels

This study examines the relationship between remittance inflows and exchange rate volatility in Nigeria from 1986 to 2025, integrating an extensive array of control variables including fixed capital formation, foreign direct investment (FDI) inflows, infrastructure development, trade openness, technological advancement, government expenditure, institutional quality, corruption control, political stability, ease of doing business, sectoral composition, natural resource rents, financial development, labour market dynamics, research and development (R&D) expenditure, and internet penetration. Employing the Autoregressive Distributed Lag (ARDL) bounds testing approach and Exponential Generalized Autoregressive Conditional Heteroskedasticity (EGARCH) models, the analysis reveals that remittance inflows exert a statistically significant dampening effect on exchange rate volatility in the long run, though this stabilizing influence is moderated by rising geopolitical risk and economic policy uncertainty. The findings indicate that institutional quality, financial development, and trade openness serve as critical transmission mechanisms, while natural resource dependence and corruption amplify exchange rate instability. The study contributes to the extant literature by constructing a comprehensive conceptual framework that situates remittance flows within Nigeria's institutional and structural context, addressing a notable gap in the literature regarding the conditional nature of remittance-exchange rate nexuses in resource-dependent emerging markets. Policy recommendations emphasize the need for diaspora engagement frameworks, institutional reforms, and economic diversification to maximize the stabilizing potential of remittances while mitigating the volatility-inducing effects of oil dependence and governance deficits.