THE CAUSAL RELATIONSHIP BETWEEN FINANCIAL DEVELOPMENT, REMITTANCE  INFLOWS AND PRIVATE INVESTMENT IN SUB-SAHARAN AFRICA

Adekunle Aribatise; Gbenga Adeyemi; Adewale Stephen Adeseke

Adekunle Aribatise Department of Economics, Wesley University, Ondo, NIGERIA
Gbenga Adeyemi Department of Economics, Wesley University, Ondo State, NIGERIA
Adewale Stephen Adeseke Department of Economics, Wesley University, Ondo State, NIGERIA

Keywords: Financial Development; Remittance Inflows; Private Investment; PARDL; Dumistrecu-Hurlin Causality

Abstract

Drawing on data from the World Bank WDI and WGI alongside IMF records, this study investigates dynamic relationships among financial sector growth, money sent from abroad & private-sector capital formation across 16 nations in Sub-Saharan Africa amid 1990 & 2023. By applying Panel Autoregressive Distributed Lag (P-ARDL) modeling as well as Dumitrescu–Hurlin causality evaluations, research show that migrant remittances boost private investment (p < 0.021) by easing capital shortages, whereas robust financial systems exert an even stronger positive influence (p < 0.001). Crucially, the combined effect of remittances and financial depth is statistically significant and positive (p < 0.002), demonstrating that advanced financial networks amplify investment -stimulating power of remittances. Moreover, the analysis confirms one-way causal pathways flowing from the remittances towards private investment, from financial advancement to private investment, and from remittances to financial sector development.. the results provide signficant information for reaching the desired conclison. Thus, in conclusion, it assert that remittances and financial development are synergistic drivers of private investment in SSA and recommend strengthening financial systems as well as lowering the cost of remitting money to boost the investment and drive sustained economic growth in SSA.