International Remittances Flow to Nigeria: A Household Perspective.

Abstract

Due to a shortage of funds, most Nigerian households cannot support essential welfare-enhancing undertakings such as engaging in non-farm income-generating ventures and coping with consumption after experiencing negative shocks. The difficulties encountered by households in accessing the internet aggravate the situation. Extant research shows that foreign remittances can finance families in developing countries to fund welfare needs. Even though remittance flows to the region peaked at around $25 billion in 2018, people struggle to finance household activities. In the absence of a consensus, researchers are putting greater effort into figuring out how remittances affect family welfare. Therefore, by examining the connection between remittances and household well-being, this thesis hopes to add to the rising research effort on establishing the actual link between remittances and family well-being. The 2015/2016 and 2018/2019 General Household Survey (GHS) data for Nigeria sourced from the World Bank is used to examine the central concerns of this study. Specifically, the research addresses: (1) Determining the threshold at which remittances become a substantial source of funding for household enterprises. (2) Classifying households according to the severity of shocks they have experienced and determining the effect of remittances on their ability to cope with post-shock consumption, and (3) Evaluating the direct link between remittances and households utilising the internet. We reviewed previous methodological approaches to analysing the link between foreign remittances and households' well-being and then constructed a model for each central issue in this study. While we used the Quantile Regression (QR) to examine the influence of remittances on the financial capital of households' businesses, we used the log-log non-linear regression technique to explore the benefits of remittances on the post-shock consumption coping of families. Before applying the method, households were categorised into two groups to determine whether there was a difference-in-means of the groups based on the severity of the shocks they had suffered. Findings were mixed and show that remittances are only effective as a source of capital for households’ enterprises when their capital requirements are less than the median value; otherwise, they are insignificant. The finding implies that remittance receipts by households are insufficient to influence financial capital beyond the median level. In the post-shock coping consumption analysis, domestic remittances are more beneficial for all homes than foreign remittances. We equally found that post- shock coping mechanisms vary based on specific household characteristics such as size. On the effect of remittances on the ability of households to connect to and utilise the internet for activities such as e- trading and other internet-enabled transactions, foreign receipts of remittances have a positive but mild influence. However, results suggest that the ability of rural households to access and use the internet is worse by as much as 40% compared to their urban counterparts. This study therefore provides evidence that: (1) The effectiveness of remittances depends on their size and not in all cases for the financial capital central concern. (2) The impact of remittances has a positive impact on the post-shock consumption of households but not as much as domestic remittances. The extent of remittances' impact on households depends on the type of shock suffered. Hence, unless interventions reduce the occurrence of the incidences of shocks, remittances might not be effective in all cases. (3) Remittances positively affect households' ability to utilise the internet, though dependent on the level of digital infrastructure. There is, therefore, the need for further investigation on the subject.