Analysis of Impact of Remittance on Poverty in Nigeria

Abstract

This study analyzes the impact of remittances on poverty in Nigeria, using data from the 2004 Nigerian National Living Standard Survey (NNLSS). The paper used a multinomial logit model with instrumental variables and the propensity score matching (PSM) method to estimate the impact of remittances on poverty. The use of these methods was based on two reasons. The first is to control for the problems of selectivity and endogeneity. The second is the fact that the implicit hypothesis of estimating the expenditures of the counterfactual group, as done in some previous studies, is in similarity between the group that receives remittances (treated) and the other that does not (untreated). The study finds that both internal and international remittances reduce the incidence, depth and severity of poverty. The statistical tests show a significant Average Treatment Effect on the Treated (ATT), due to internal and external remittances. The receipt of internal remittances reduces the poverty headcount by 11.14% and poverty gap by 9.7% while the receipt of international remittances makes poverty indices almost nil.

Effects of Remittances on Poverty Reduction: the Case of Indonesia

“…Although remittances are statistically significant to poverty, the effect of remittances in Indonesia is still considered to below, at only 2.565%, compared to other countries. Remittances have reduced poverty by 11.14% in Guatemala (Adams, 2004) and by almost 100% in Nigeria (Chukwuone et al, 2012). Moreover, it was found that poverty declined by 26.7% in Indonesia during 2007 (Adams & Cuecuecha, 2010).…”

International Migrant Remittances and Labour Supply in Nigeria

“… Effect of remittance inflows on certain economic indicators in Nigeria.As emphasized in the background of the study, there have been many studies on remittances, ranging from the size and frequency of their flow to their effect on poverty and inequality, fixed capital formation, labour supply and economic growth, and so on. Regarding their effect on poverty and inequality, Chukwuone, Amaechina, Iyoko, Enebeli‐Uzor, and Okpukpara () found that both internal and international remittances reduce the incidence, depth and severity of poverty, but that the poverty‐reducing effect of international remittances is more pronounced. Waheed et al.…”

“…In Nigeria, there have been many studies and publications on remittances, ranging from their effect on economic growth (Agu, ; Oduh and Urama, ; Iheke, ; Ojapinwa, ; Ojapinwa and Odekunle, ; Odionye and Emerole, ); their impact on poverty (Chukwuone, Okpukpara, Amaechina, Enebeli ‐Uzor and Ivoko, ; Ajayi, Ijaiya, Ijaiya, Bello, Ijaiya, and Adeyemi (); Odozia, Awoyemi and Omonona, ; Babatunde and Martinetti, ; Olowa and Shittu, ); their effect on inequality across rural and urban areas (Fonta, Onyukwu and Nwosu, ); their effect on Investment (Ojapinwa and Odekunle, ); and their effect on the labour supply (Posso, ), amongst others.…”

Do Migrant Remittances Cause Dutch Disease in Nigeria?

“…For the Nigerian economy, the studies include Agu (), Oduh and Urama (), Ojapinwa (), Ojapinwa and Odekunle (), and Odionye and Emerole (), which studied the effect of remittances inflow on economic growth. Others include those which analysed its impact on poverty: Chukwuone et al., ; Ajayi et al., ; Odozia et al., ; Babatunde and Martinetti, ; Olowa and Shittu, ). Other papers analysed their effect on investment: (Ojapinwa and Odekunle, ), on the labour supply (Posso, ; Urama et al., ) and on Household expenditure pattern (Yuni et al., ).…”