Remittance Flows and Exchange Rate Volatility in Nigeria: The Roles of Geopolitical Risk and Policy Uncertainty

Using the GARCH-MIDAS model, we examine how remittances affect exchange rate volatility in Nigeria from April 2006–May 2024, a period covering major global and domestic shocks. We find that remittances can amplify exchange rate fluctuations, especially during periods of elevated economic policy uncertainty and heightened geopolitical risk. Out-of-sample forecast evaluation using the Diebold–Mariano test confirms the robustness of these results. Our findings indicate that remittances’ impact on exchange rate stability is conditional, highlighting the importance of policy transparency and careful monitoring in remittance-dependent economies.