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Migrant Remittance Inflow and Industrialization in Africa: What Role Does Financial Development Play?

In: Financing Africa’s Development

Author

Listed:
  • B. W. Adeoye

    (University of Lagos)

  • Chinenye Ifeoma Nwokolo

    (University of Lagos)

  • Nnenna Ifunanyachukwu Igboanugo

    (University of Lagos)

Abstract

The eruption of Global Financial Crises at the rear end of 2008 with its aftermath effect has shifted the focal point of financial-cum-capital reliance of most developing countries away from sources of finance induced externally. This, however, kick-started research interest toward considering other ways of sourcing financial resources for development apart from the widely known sources like foreign portfolio investment (FPI), foreign direct investment (FDI) and official development assistance from overseas. This notwithstanding, migrants’ remittances imperatively remain a better source of finance as it is found to be more resilient, in times of macroeconomic shocks and other natural disturbances compared to other sources of capital flows. This uniqueness has made it a point of focus to African Development practitioners as a more reliable source for financing development in Africa. Thus, for any developing country to have a sustainable development it must transit from agricultural produce to industrialization as it is seen as the bedrock of development. This ignited our motivation for this study to assess how migrant remittances can directly and/or indirectly influence industrialization using a panel data of 46 African countries from 1980 to 2017. The direct effect is evaluated through financial development channels. The study used both interactive and non interactive empirical evidence methods for a more robust estimation; this includes (a) Fixed Effects techniques (FE) to rule out heterogeneity; (b) General Method of Moments (GMM) to rule out persistence in industrialization and (c) Instrumental Quantile Regressions (QR) to explain for the previous levels of industrialization. The non interactive stipulations will give account for the direct impact of migrant remittances on industrialization while the interactive stipulations will account for the indirect effect. The findings clearly show that personal remittance inflows can only drive industrialization through financial development at the early stage.

Suggested Citation

  • B. W. Adeoye & Chinenye Ifeoma Nwokolo & Nnenna Ifunanyachukwu Igboanugo, 2020. "Migrant Remittance Inflow and Industrialization in Africa: What Role Does Financial Development Play?," Advances in African Economic, Social and Political Development, in: Diery Seck (ed.), Financing Africa’s Development, pages 191-220, Springer.
    • Handle: RePEc:spr:aaechp:978-3-030-46482-0_11
    DOI: 10.1007/978-3-030-46482-0_11
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    Cited by:

    1. Chinenye Ifeoma Nwokolo & Matthew Ikechukwu Ogbuagu & Wakeel Atanda Isola, 2021. "Migrant’s remittance and investment financing nexus in Africa: Does investment climate matter?," Future Business Journal, Springer, vol. 7(1), pages 1-11, December.

    More about this item

    Keywords

    Migrant remittances; Africa; Industrialization; Financial development;
    All these keywords.

    JEL classification:

    • O55 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Africa
    • F24 - International Economics - - International Factor Movements and International Business - - - Remittances
    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • F63 - International Economics - - Economic Impacts of Globalization - - - Economic Development

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