Do Remittances Mitigate COVID-19 Employment Shock on Food Insecurity? Evidence from Nigeria

Abstract

The objective of this paper is to assess the mitigating role of remittances during the adverse COVID-19 employment shock on Nigeria's food insecurity. Based on pre-COVID-19 and post-COVID-19 surveys, we use a difference-in-difference approach while controlling for the time and household fixed effects. Results indicate that remittances are mitigating the negative consequences of COVID-19 employment shocks, especially in the short run. We find that 100% of the deterioration in food insecurity, owing to the shock, is offset by the remittances received. While the adverse effects of the shock persist over time, the mitigation effect of remittances appears to be effective only at the early stages of the pandemic, however. Furthermore, the mitigation effect of remittances seems heterogeneous regarding the origin of remittances, residence area, and poverty status. The mitigation effect of remittances is higher for remittances from abroad than for Domestic ones. We also find a higher mitigating effect of remittances in rural areas and for non-poor households. Finally, our results shed light on the capital channel as a crucial mechanism explaining the mitigation effect of remittances. Notably, findings suggest that formal financial inclusion, capital ownership like livestock or rental earnings, amplifies the attenuating effect of remittances.

COVID-19 and remittances to Mexican states

“…This suggests that COVID-19 has reduced informal coverage against risk and social support (Janssens et al, 2021). Meanwhile, in the cases of Tajikistan and Nigeria, remittances served as a form of insurance for recipient households in the face of adverse shocks due to COVID-19 (Akim, Ayivodji and Kouton, 2021;Shimizutani and Yamada, 2021).…”