THE ROLE OF REMITTANCES IN THE FINANCIAL DEVELOPMENT OF NIGERIA (1978-2018)

Background of the study: Remittances refer to monetary transfers made by individuals residing in foreign nations to their family and acquaintances in their countries of origin. They represent a significant contributor to the financial development inside a specific country. Remittances refer to monetary transfers made by individuals residing abroad to their home countries. Remittances in numerous economically disadvantaged nations are quantified in billions of dollars, occasionally constituting a substantial proportion of the gross domestic product (GDP). According to Coppola (2015), the financial resources of individual households experience a significant augmentation, and the functioning of local economies relies heavily on this influx of funds. According to Adams and Page (2003), Harrison (2003), and the Migration Policy Institute (2003), remittances refer to specific transactions that are initiated by individuals who reside or work outside their place of birth or origin and are directly associated with their migration. According to a publication by Jens Reinke from the Statistics Department of the International Monetary Fund in 2007,In contrast, financial growth is commonly characterised as the enhancement of quantity, quality, and efficiency in the provision of financial intermediary services (Choong and Chan, 2014). According to the Global Financial Development Report (GFDR) published by the World Bank in 2016, the concept of financial development revolves around the mitigation of various expenses associated with the functioning of the financial system. According to the Global Financial Development Report (GFDR) of 2016, the establishment of financial contracts, markets, and intermediaries can be attributed to the process of reducing the costs associated with information acquisition, contract enforcement, and transactional activities. Extensive research has established that the advancement of financial systems plays a pivotal role in driving economic development within a certain nation. According to the Global Financial Development Report (GFDR) of 2016, it has been highlighted that the process of capital accumulation and technological advancement is facilitated by an increase in the savings rate. This is achieved through the mobilisation and pooling of savings, the generation of investment-related information, the facilitation and encouragement of foreign capital inflows, and the optimisation of capital allocation.According to Yiheyis and Woldemariam (2016), remittances are gaining significance as crucial income sources and possible investment capital for households, while also serving as a reliable external financial resource for governments in developing nations. According to the findings of Yiheyis and Woldemariam (2016), it was verified that in the year 1990, the documented inflow of personal remittances to developing economies amounted to $29 billion, which accounted for 1.1% of the respective countries' gross domestic product (GDP). In order to provide context, it is noteworthy to mention that during the same year, the net official development assistance (ODA) amounted to approximately $56 billion, or 1.8% of the relevant numbers. According to Yiheyis and Woldemariam (2016), the amount of remittances sent to poor countries had experienced a significant increase by 2012, reaching over $350 billion. This sum was more than double the net official development assistance (ODA) received by these countries, indicating the growing significance of remittances.According to Yaseen's (2012) empirical documentation, there exists a positive correlation between remittances and financial development. This correlation is observed through the flow of remittances received from overseas, which are deposited into domestic banks. The discontinuation of remittances would have a severe impact on both families and the economic progress of the specific nation, particularly in the immediate term. According to research conducted by the World Bank and World Economic Forum, it has been shown that remittances have a positive impact on both the living conditions of individual beneficiaries and the overall well-being of communities (Allison, 2019). Similarly, Allison (2019) highlighted the challenges faced by economists in quantifying the comprehensive influence of remittances due to restricted data availability. Furthermore, the positive effects of remittances are somewhat mitigated by negative factors such as inflation, complacency, and brain drain. It is probable that the aggregate value of remittances, encompassing both formal and informal routes, exceeds the sum of remittance flows just through official channels by a factor of at least two. When effectively utilised, these remittance flows can have favourable outcomes for the economy of the migrants' nation of origin. As stated by Boafo (2011), the remittance flows have the potential to be directed towards various purposes such as savings, investment, business establishment, or community development initiatives.