REMITTANCES, EXCHANGE-RATE VOLATILITY AND HOUSEHOLD CONSUMPTION RESILIENCE IN NIGERIA: EVIDENCE FROM AN ARDL ERROR-CORRECTION MODEL
DOI:
https://doi.org/10.66811/eijrihs.vol1.no4.67Keywords:
Remittances, exchange-rate volatility, household consumption, resilience, ARDL, error-correction modelAbstract
This paper examines whether migrant remittances strengthen household consumption resilience when exchange-rate conditions are unstable in Nigeria. Annual data for 1990–2024 are assembled from the Central Bank of Nigeria’s national accounts and official World Development Indicators derived from International Monetary Fund balance-of-payments and exchange-rate statistics and United Nations population estimates. Household consumption resilience is operationalised as the preservation and recovery of real household final consumption expenditure per capita. Remittances are deflated to 2015 US dollars and expressed per capita. Exchange-rate volatility is the three-year rolling standard deviation of annual log changes in the official naira–US dollar rate. Augmented Dickey–Fuller and KPSS tests show a mixture of I(0) and I(1) variables and no I(2) series. An ARDL(1,1,2,1) model is selected by the Akaike information criterion from error-correction-admissible lag structures. The bounds statistic is 5.688, above the 1% upper critical value, supporting cointegration. In the long run, the remittance elasticity is positive (0.048) but statistically insignificant at 5%, while real income has a strong positive elasticity of 0.791. Exchange-rate volatility has no stable long-run level coefficient. In the short run, remittance growth has a positive coefficient of 0.0716 at the 10% level, whereas the cumulative volatility effect is −0.0056 (p=0.0018). The error-correction term is negative and highly significant (−1.111), indicating rapid adjustment with overshooting. Alternative remittance intensity, volatility, inflation and sample specifications preserve the central result: remittances provide limited short-run support, but exchange instability can erode consumption resilience. Policies that lower remittance costs, deepen formal channels and stabilise inflation and foreign-exchange conditions are therefore complementary rather than substitutes.
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