Effect of Diaspora Remittances on Small Medium Scale Enterprises (SMEs) in Nigeria

Abstract

Diaspora remittance flows to Nigeria have been increasing over time. However, the effect of this increase on theperformanceof SMEs has not been adequately studied. Many researchers have contended that if diaspora remittances are well invested, they could contribute immensely to bridging the SMEs financing gap of N617. 3 billionannually. Thus, this study uses time series data on Nigeria from the World Bank’s World Indicators Database for a period to examine the effect of diaspora remittances on SMEs. The study employs robust ordinary least squares (ROLS) to handle issues of outliers. The results show that diaspora remittances have a positive and significant effect on SMEs' performance in all the examined models. Hence, due to their positive effect on theperformance of SMEs in Nigeria, the government should formulate policies to leverage the increase of diaspora remittances, which would provide an alternative window forfinancing SMEs.

Keywords: diaspora, remittances, small scale enterprise, robust ordinary least square

JEL Classification: C22, E51, F24, L29