The impact of remittances on household poverty

Abstract

In 2015, the inflow of international remittances to Nigeria stood at $20.5 billion (World Bank, 2016). This represents 3.5% of the global flow and 58.5% of the Sub-Saharan Africa’s estimate. In spite of this increased flow, household poverty has remained pervasive in Nigeria. Previous studies have focused on the impact that aggregate remittances have on household poverty without considering the roles of the different types of remittances (cash, food and other remittances) on household poverty in Nigeria. This study was, therefore, designed to analyse the impact of the various types of remittances on household poverty across the rural and urban areas and the six geo-political zones of Nigeria. The study was premised on consumption theory which incorporates remittances as a form of income that affects household consumption. The methodology was similar to that of Mukherjee and Benson (2003). In this study, the Ordinary Least Squares (OLS) was used to estimate the mean of the per capita expenditures (which were compared with the absolute poverty line) of remittance-receiving households against households, community and regional profiles. Probit regression was used as robustness checks on the OLS estimates. In order to examine the effect of endogeneity, the Heckman’s two-stage estimation technique was deployed. The impact of aggregate, cash, food and other remittances on household poverty are chequered in rural, urban and across the six geo-political zones. These impacts are felt strongly in the rural and urban areas as well as in the North Central, South East and South West zones than in other geo-political zones of Nigeria.