Understanding the Pathways to Industrialization in Nigeria:

Is Remittance-Finance Nexus Substitute or Complement?

Abstract

This study examines the role of financial market development in remittance-industrialization relations in Nigeria for a period straddling from 1981 to 2018. We established the following findings using the fully modified least square method. First, the unconditional impact of Diaspora remittance on industrialization is found to be negative and statistically significant. 
Second, poor financial market development has an unqualified negative influence on industrialization. In particular, low domestic credit to the private sector by banks unrestrictedly affects industrialization whereas the impact of broad money is statistically 
irrelevant. Third, the marginal effect of interactions between remittance and domestic credit to the private sector is statistically negative. Fourth, the corresponding net effects of the interactive term of remittance and domestic credit are in the same way negative on industrialization. It implies that financial market development does not play a cooperative role in improving the 
links between Diaspora remittance and industrialization in Nigeria. This confirms that remittance and financial market development are substitute and not complement. Fifth, domestic credit to the private sector by banks to GDP will modulate a direct impact of 
Diaspora remittances on industrialization at the rate of 11.8%. Finally, the amplifying effects of capital investment, trade openness and government consumption expenditure on industrialization are notable statistically. On the policy front, emphasizing remittance inflow is not just sufficient but putting appropriate measures on how to make sure these transfers are put into productive use and ensure industrialization are equally necessary.