Effects of Remittances on Poverty among Rural Households in Nigeria

Poverty in Nigeria is more prevalent in the rural sector due to dwindling and inequitable distribution of real income. Remittances (money and goods sent by migrants to relatives back home) can be poverty reducing. However, the extent to which remittances affect poverty and income inequality has not been adequately documented in Nigeria. This paper uses a large, nationally-representative household survey to analyse the impact of domestic remittances (from Nigeria) and foreign remittances (from African and other countries) on poverty in rural Nigeria. The socioeconomic characteristics showed that on the average, households that received foreign remittances had older heads (61.7 +/- 19.7 years), smaller household size (4.0 +/- 2.5), bigger land size (18.53 +/- 26.5 ha), higher literacy rate (0.50 +/- 0.5) and non-poor (0.08 +/- 0.3) with higher annual per capita expenditure (. 111,768 +/-. 179,868). Poverty analysis showed that both types of remittances reduce the level, depth and severity of poverty in rural Nigeria. However, the size of the poverty reduction depends on how poverty is being measured. The paper finds that poverty is reduced more when domestic, as opposed to foreign remittances are included in household income, and when poverty is measured by the more sensitive poverty measures: poverty gap and squared poverty gap. At a poverty line of. 23,733 per annum, a 10% increase in domestic remittances decreased Poverty Incidence(PI), Poverty Gap (PG) and Squared Poverty Gap (SPG) by 1.80%, 1.60% and 1.60% while 10% rise in foreign remittances reduced poverty incidence (PI), Poverty gap (PG) and Squared poverty gap (SPG) by 0.86%, 0.62% and0.62% respectively in rural Nigeria. Across GPZs, While 10% increase in foreign remittances reduced PI (-0.88%) in North-Central (NC) it had no effect in NE (0.00%). Same increase in domestic remittances reduced PI, PG, SPG most in the SS (0.29%, -1.85% and -0.75%) and least in NE (-0.09%, -0.82% and -0.22%).