Over the years, migrant remittance inflows to Nigeria have become one of the largest sources of unwavering external financial flows surpassing the conventional sources such as official development assistance, foreign portfolio investment, private capital flow and foreign direct investment (FDI) [1]. The above underscores the significance of remittances as an essential source of foreign capital that can help Nigerians increase expenditure on consumption, health, housing, education, enhance small businesses, boost her economic growth and alleviate poverty [2-4]. The degree of the economic effect of remittances on the receiving countries hinges on how it is being spent by the recipient households. If these flows increase consumption in sectors that have strong sectoral linkages with other economic sectors, the positive effect of remittances may propagate to these sectors and have an amplified aggregate effect on the entire economy. Thus, remittance has the potential to improve both human capital (through expenditure on education and health purposes) and physical capital (through development of business ventures, construction/repair of buildings). Remittance inflow can reduce poverty through the enhancement of investment in recipient nations when channeled to productive investmentts such as small scale business outfits, education, cottage industry, housing estate,etc [5]. This depicts that remittances could significantly boost income or consumption and reduce poverty. Against this background, the ascendant capacity of remittances to substantially reduce poverty, is hinged on the type, structure and functionality of the financial system arrangement in place in the recipient country [6]. The theoretical argument regarding the tripartite relationship among financial development, remittances, and poverty reduction can be traced to absorptive capacity which emphasizes that when remittance inflows increase, financial development channels excess funds from savers to investors; as a result, financial constraints lessen and the number of long-term investment projects increase which will twinkle down to poverty reduction [6-9]. These long-run investments ensure stable growth paths, creation of employment opportunities, thereby reducing poverty [5].

In addition, Qiang et al [10]. Succinctly put that one of the conditions for recipient country to attract higher remittances inflows is sophisticated financial framework that develop and encourage formal financial institutions like banks to engage in remittance market. That is, development of financial institutions, markets, instruments and intermediaries will aid and smoothen trade, lower the cost of transactions, assist investment, control risks [2-12]. And grow service options to the senders and receivers of remittances. Specifically, a well financial development with financial institutions access, efficiency and depth will enhance remittance inflows and embolden both senders and recipients to transfer, save and invest into productive ventures. Therefore, financial accessibility, depth and efficiency play essential function in attracting remittance inflows and harnessing it for more developmental investments [13-15]. In the same vein, Tauqir and Majeed [15]. alluded to that above strand that a financial development will build the confidence level of migrant workers with regard to sending money home for productive investment projects, creating employment opportunity and therefore reduces poverty.The motivation of this study in Nigeria context hinges on the fact that the country is one of the major labour–exporting nations in Africa own to poor economy and working condition. For example, between 2015 to2022, the number of migrants in Nigeria has increased from 465,932 to 1,199,115 denoting 11.66% of entire population [16]. Also, record from International Organization for Migration (2021) showed that remittance flow to Nigeria in 2016 was $19.0 billion, it increased to $43.8 billion by 2021, making Nigeria the highest recipient of remittances in Africa. Similarly, remittances as a ratio of GDP stood at3.54 per cent, 3.54 per cent and 3.54 per cent in 2019, 2020 and 2021, respectively (International Organization for Migration (IOM), 2021). The above highlights the import of remittances as a significant source of foreign capital to Nigeria and economically this significant improvement should have increased investment, provided employment opportunities and consequently reduced poverty, but, sadly it is other way round in Nigeria. The high rate of poverty is becoming very alarming and endemic, such that 5 out of every 10 Nigerians are regarded to be extremely poor, with meagre income to meet the minimum standards for well-being such as food, shelter, education, medical care and clean water, (Dada and Fonowopo, 2020). For instance, in 1986, Nigeria’s poverty rate stood at 46.3 per cent. It increased to 63.5 per cent in 1996, 53.12 per cent in 2006 and then, 57.2 per cent in 2016 and 61.2 per cent in 2017. Although it declined to39.1 per cent in 2018, but increased further to 40.1 per cent in 2019 and recently rose to 63 per cent which shows that more than 133 million Nigerians are multidimensional poor (NBS, 2022). No doubt that World Bank described Nigeria as the headquarter of poverty in the world. On the empirical fronts, evidence of migrant remittances and its effect on poverty is still very sparse in Nigerian context. Whereas majority of extant studies considered more of effect of migrant remittances on investment and economic growth [18-22]. Few studies on remittances and poverty reduction produced mixed and inconclusive results [6, 9, 23-25]. However, aside from the inconclusive findings, all the previous studies were carried out within the context of cross-sectional or panel data frameworks. This simply connotes that different remittances inflows and poverty rates in each country were not taken into account in their estimations. Similarly, economic policies as touching the migrant remittances-poverty reduction nexus differ amongst countries, and their attainment is premised on the efficacy of policies initiated to execute them, and which are country specific. Therefore, this brings up the issue of the significance and practicability of the policy implications in the studies for particular problems that are peculiar to specific countries.Also, the few empirical studies on this phenomenon failed to account for interactive effect of financial development and migrant remittances on poverty reduction, especially in Nigerian context where it is believed that development of financial framework, instruments, markets and intermediaries will enhance remittance inflows and inspire both senders and recipients to send, save and invest it into productive investments. Financial accessibility, depth and efficiency perform a crucial role in attracting remittance inflows and channeling it into more developmental investment [4,26]. More so, a well-functioning financial system will build the confidence level of migrant workers with regard to sending money home for productive investment projects. This will in turn create employment opportunity and therefore reduces poverty [2,11,12]. To this end, the development of domestic financial frameworks is pertinent in encouraging more remittance inflows into financial institutions [27]. In contrast, less-functioning or weak financial system tends to weaken the confidence level of migrant workers in sending money home for productive investment projects. This will discourage both senders and recipients to transfer, save and invest remittance money into productive uses [14, 28,29]. Meanwhile, unlike previous studies, this study employed the three indicators of financial development and its overall index as interaction terms to guarantee stability and consistency, but analyzed individually owning to high collinearity inherent in time series data. To verify, validate the results of DOLS and confirm the consistency of our results regardless of the methods of analysis adopted, fully Modified Ordinary Least Square (FMOLS) and Canonical Cointegration Regression (CCR) estimation techniques are further adopted as robust estimations.Consequent on the above, this study filled the obvious lacuna in the literature by answering the following questions; (a) does remittances reduce poverty in Nigeria? (b) How important is the influence of financial development in the migrant remittance-poverty reduction nexus in Nigeria? This study proffers policymakers evidence-based policy implications for initiating policy objectives that will grow the financial sector, attract more migrant remittances and consequently reduce poverty as encapsulated in Nigeria National Development Plans (2021– 2025) as well as Sustainable Development Goals (SDGs, goal 1). The other part of the study is organized thus: section 2 presents the literature review and section 3 provides aspect of the methodology and data. This is followed by empirical results and discussion in section 4, and conclusion in section 5.

Theoretical Perspective

Two-Gap Model:

This theory as propounded by Chenery and Strout [30]. Stresses the importance of foreign capital inflows to fill the savings and foreign exchange gaps. In this regards, the disparity between local investment and local savings explains the saving gap. The foreign exchange gap is the disparity between the foreign exchange inflows and distributed via imports and exports, respectively. Meanwhile, Harrod-Domar growth model further substantiated the assumptions of the two-gap model via their advocacy for attracting foreign capital (such as foreign portfolio investment, remittances, foreign direct investment and foreign aids, etc) to fill the savings-investment disparity, especially in economies with meagre local savings in relative to local investments [31]. The theory postulated that foreign capital (remittances inclusive) could be utilised to equilibrate domestic savings and investment which will create employment opportunities and twinkle down to poverty reduction.

Empirical Evidence

On the empirical front, studies have started emerging on migrant remittances and domestic investment as well as migrant remittances and economic growth, mostly in cross countries, but with scanty or no extant studies on the role of financial development on migrant remittances-poverty reduction nexus in Nigeria, where there is persistent rise in multidimensional poverty index in the face of exponential increase in migrant remittances to Nigeria and many financial sector reforms. Recently, National Bureau of Statistics (NBS, 2022) reported that over 133 million Nigerians are suffering from multidimensional poverty. This represents 63% of Nigeria total population. No wonder that World Bank described Nigeria as the headquarter of poverty in the world. In spite of the sparse extant studies, findings from the extant studies on this phenomenon established mixed and inconclusive results. Therefore, few empirical studies found that migrant remittances have led to poverty reduction or economic growth [6, 9,32,33,34, 35] . On the other side of the coin, another few studies found that migrant remittances didn’t reduce poverty [36-39]. And Sharimankin et al [40]. In this regards, Pradhan and Mahesh [41]. Employed system GMM to investigate the impacts of migrant remittances on poverty reduction in 25 developing nations from 1990 to 2014. The empirical findings found inverse relationships between migrant remittances and poverty. This can be established that foreign remittances have negative effects on poverty because a higher GDP per capital suggests minor or lower poverty head count ratio. A similar finding is found in a panel study by Akobeng [42]. Who utilizes system GMM to empirically assess the effectiveness of remittances on inequality and poverty in Sub-Saharan Africa? The findings indicate that remittances reduce poverty, but the degree of the poverty reduction pivots on the measurement of poverty. The results of the study further reveal that remittances have income- equalizing impacts, meaning that a well-developed financial framework boosts remittances efficacy in Sub- Saharan Africa. In another cross-country study by Huay and Bani [33]. Who analyze the nexus between migrant remittances and poverty via the human capital channel in 54 developing nations within the framework of system GMM? The empirical results indicate that both remittances and its interaction with human capital (education) reduced poverty. The marginal impact of remittances reduces the level of education, signifying that education moderates the impact of remittances on poverty. Similarly, Inoue [43]. Adopted similar technique, GMM, to empirically access the impact of financial development on foreign remittances - poverty reduction nexus in 120 developing countries, spanning the interval of 1980–2013. The study found the same results that financial development and migrant remittance inflows significantly reduced poverty in the sampled nations. The results further indicate that interaction effect of financial development and migrant remittances on poverty reduction process is negative, signifying that it damps down poverty in the sampled economies. Furthermore, Masron and Subramaniam [7]. Examined the effects of remittances on poverty in 44 emerging economies from 2006 to 2014 within the dynamic panel technique. The empirical results established strong evidence of inverse nexus between foreign remittances and poverty. This indicates the significant role of migrant remittances in reducing poverty in the sampled countries. Also, Mehedintu et al [44]. Examine the growth of remittances and risk of poverty threshold for nine emerging countries in the European Union within the period 2005–2017. The empirical results revealed that the evolution of both remittances and risk of poverty threshold was tremendously shaped by the global economic predicament. Although after the crunch, the risk of poverty threshold has seen a riding trend in all developing nations, the remittances have undergone winding variations, dramatic decrease for some of the nations (Latvia and Romania) and noteworthy rises for others (Hungary). Abduvaliev and Bustillo [9]. Investigate the implications of remittances on economic growth and poverty reduction in 10 selected former post-Soviet republics from 2000 to 2018 within the framework of fixed effect and random effect. The study found that remittance inflows boost per capita GDP, but ameliorate poverty severity in the sampled countries. The study underscores the significance of migrant remittances in reducing poverty through increasing income and smoothing consumption levels. Similar findings were ascertained by Noureen et al [6]. Who employed ARDL in a panel data set of developing countries from 1990 to 2020, to investigate the link between remittances and poverty? The empirical findings established evidence of significant negative nexus between remittances and poverty in the sampled nations. This connotes that remittances can boost the living standard of the poor. The results further exhibited that financial development is significant and reduce poverty.

Contrary to the above findings, Kousar et al. [37]. Employed ARDL-Bound testing approach in a country specific study to assess the effect of foreign remittances and financial development on poverty and income inequality in Pakistan. The findings revealed that remittances increase poverty and income inequality in both the short run and long run. The study’s results established inverted U-shaped nexus between income inequality and per capita income, while the second order coefficient of per capita income greatly reduce poverty in the country. On the other hand, the results only exhibited U-shaped relationship between income inequality and country’s per capita income. Further results of the study indicate that education hugely reduces income inequality in the short and long-run, but, it rises poverty in the long-run. Also, financial was found to be positively increased poverty and income inequality in the short-run. The above similar finding was also found a study by Kayani [45]. Who utilized OLS technique to examine the important role of foreign remittances on poverty reduction in a poverty-ridden Kyrgyzstan within the period of 2008-2019? Empirical results of the study indicate that remittances inflows to the country exacerbate poverty severity.There are further studies which interacted financial development with remittances inflows in the growth process, household savings, domestic private investment, human capital development and industrialization. This simply connotes that financial development is not only imperative in the process of poverty reduction, but also in the development process of the aforementioned macroeconomic variables. To this effect, Olayungbo and Quadri [2]. In a panel study of 20 sub-Saharan African nations spanning the interval of 2000 and 2015, made use of both Pooled Mean Group and Mean Group and ARDL approaches to examine the nexus among remittances, financial development and economic growth. The empirical result revealed that, after ascertaining cointegration among the variables of interest, remittances and financial development had favourable impacts on economic growth both in the short and the long run. The interaction effect of financial development and remittances on growth process is positive. Lastly, there are unidirectional nexus from GDP to remittances and from financial development to GDP. Conversely, no causality between remittances and financial development in the SSA countries. In the same vein, Ngoma et al. (2021) adopted Panel GMM and Pooled Mean Group (PMG) estimators to examine how remittances impact on economic growth via financial development in Asia from 1984-2010. The study’s findings exhibited that remittances indirectly affect economic growth with the help of developed-financial framework. Meanwhile, Tauqir and Majeed [15]. examine the effect of remittances on output volatility via financial development, using data for 158 countries from 1971 to 2017 wit\\\\\hin the framework of Fixed Effects Instrumental Variable (FEIV) and System Generalized Method of Moments (GMM)) techniques. The study adopted multiple indicators of financial development (access, efficiency and depth). The study’s findings are robust throughout the specifications. Thus, the findings exhibit that the three indicators of financial development have significant favourable effect on the remittance-output volatility nexus. In another perspective, Adekunle et al. [1]. Assessed the structural connections between remittances and financial development in 53 African economies spanning the interval of 1986-2017 within the framework of Pooled Mean Group estimation technique. The study established a favourable long-run association between remittances and financial development. On the relationship between remittances inflows and domestic investment, Hossain and Sunmoni [46]. Who assess the effect of remittances on household investment choices in Sub-Saharan Africa? The study made use of recursive bivariate probit model and instrumental variables and the study found that remittance- receiving households in sub-Saharan Africa are more likely to invest in human and social capital compared to non-remittance receiving households. However, there is large disparity in investment behaviour throughout the nations. A more recent study by Mohammed and Karagöl [31]. Employed 2SLS and system generalized method of moments (Sys-GMM) techniques to examine the nexus among remittances, institutional quality and investment in Sub-Saharan African (SSA) from 2004 - 2018. The results exhibit a favourable and significant effect of remittances on domestic investment in SSA. The results further indicate a substitutional connection between remittances and institutions in enhancing investment. Similarly, Okeke et al., [39]. Examine the causal relationship between remittances and private domestic investment in Nigeria from 1981Q1-2020Q4 within the framework of Toda and Yamamoto causality test. The result of Toda and Yamamoto causality test established a unidirectional causal nexus between remittances and private investment in Nigeria. Negating the position of the previous studies, Nyeadi et al [37]. Employed system GMM approach to investigate the moderating role of financial development and quality governance on the connection between remittances and domestic investment in 41 African countries from 2004 to 2018. The study evidently established negative relationship between diaspora remittances and domestic investment in home countries. However, the study ascertained that both banking sector development and quality governance significantly improve domestic investment in Africa. Therefore, when banking sector development interacted with good governance distinctly with remittances, each interactive term exhibits a significant favourable effect on domestic investment. This connotes that remittances can only have favourable effect on domestic investment via sound and well-developed banking sector and good governance. Mohammed [30]. Assessed the nexus among remittances, institutions and human development in Sub- Saharan African (SSA) countries, covering the interval of 2004 to 2018. The study employed dynamic model; system Generalized Method of Moments (Sys-GMM) estimators and the findings indicate a positive and significant impact of remittances on HD in in the sampled countries. The findings further exhibit a substitutional relationship between institutions and remittances in stimulating HD. The estimations mean that remittances promote HD in countries with a feeble institutional environment. The findings also established that the marginal significance of remittances as a source of capital for HD falls in countries with well-developed institutions. Similar findings were found by Ali et al. [19]. Who investigated the implications of remittances on human capital development from 1996–2016 in sub-Saharan Africa? The study adopted system GMM approach and the empirical findings exhibit that remittances favourably affect human capital investment. The finding established that remittances also significantly and favourably influenced human capital development when interacted with financial development. In the context of cross sectional data study, Sharimakin et al [22]. Assessed the nexus between foreign remittances, personal relative deprivation and patriotism in Nigeria. Empirical findings from the study demonstrated that greater subjective feelings of personal relative deprivation were associated with higher foreign remittances from family members, friends and neighbours. Similarly, lower patriotic behaviour were found to associate with higher subjective feelings of personal relative deprivation. The results provide further evidence for theories on relative deprivation-patriotism nexus. The research outcomes from existing studies on remittances and poverty reduction produced mixed and inconclusive results. In the first instance, this makes it an unfinished business that requires more empirical investigations. Also, aside from the inconclusive results, most of the extant studies were carried out within the context of cross-sectional or panel data frameworks. This simply connotes that different rate of remittances and poverty rates in each country were not taken into consideration in their analyses. Also, the few empirical studies on this phenomenon failed to account for interactive effect of financial development and migrant remittances on poverty reduction, especially in Nigerian context where it is believed that development of financial institutions, instruments, markets and intermediaries will facilitate remittance inflows and encourage both senders and recipients to transfer, save and invest remittance money into productive uses [47,48]. Therefore, this study is distinctively different from extant studies by taking into account the mediating role of financial development in influencing the impact of remittances inflows on poverty reduction process in Nigeria.

The theoretical link between remittances-poverty is conceptualized in Two-Gap model propounded by Chenery and Strout [49]. The theory stresses the importance of attracting foreign capital (such as foreign portfolio investment, remittances, foreign direct investment and foreign aids, etc) to fill the savings- investment disparity, especially in economies with meagre local savings in relative to local investments [50]. The theory postulated that foreign capital (remittances inclusive) could be utilised to equilibrize domestic savings and investment which will create employment opportunities and twinkle down to poverty reduction. This means poverty reduction is a function of foreign capital (such as remittances, etc).

POV=F(REM,X)      (1)                                                                                                                                     Where PV is poverty, REM is a migrant remittances inflows and X is a vector of control variables.

Model Specification

In order to examine the role of financial development in the remittances - poverty reduction nexus and following the methodology employed by Inoue [43]. And Kousar et al [37]. Equation (1) is augmented to accommodate interaction term between remittances and financial development and control variables. Thus, the working models are expressed below:

PVt   = d₀ + d₁REMt  + d₂GCFt  + d₃HUMt  + d₄GDPt  + d₅ TOPt  + e_{t                                                                            (2)}

PVt = d0 + d1REMt + d2 FD + d3 FDt * REMt + d4GCFt + d5 HUMt + d6GDPt + d7TOPt + e            (3)

Where PV is poverty, REM is migrant remittances, FD is a financial development index, GCF is gross capital formation, HUM = human capital development, GDP = real gross domestic product and TOP = trade openneare parameters to be estimated in the models without interaction and models with interaction, respectively, and t is error term.   In this study, three features of financial development and its overall index are included as interaction terms to ensure stability, but analyzed separately due to high collinearity.

Following the extant study by Olaniyi & Oladeji, [2]. The marginal effect of remittance on poverty reduction given the extent of financial development in the recipient country, is derived by taking partial derivatives of Equation (3) with respect to poverty:

The interpretations of equation (3) premised on the coefficients of d₁ and d₃ respectively in the equation. In agreement with the extant study of Olaniyi & Oladeji [2].the following probable outcomes can be ascertained from the two coefficients:

1 .If d₁> 0 and d₃> 0, it connotes that remittances doesn’t reduce poverty and so also financial

Development doesn’t offer required impetus for poverty reduction.

2. If d₁ > 0 and d₃ < 0, it implies that remittances doesn’t damp down poverty, however, financial Development offers prerequisite stimulus for poverty reduction.
3. If d₁ < 0 and d₃ > 0, it suggests that remittances reduces poverty, while financial development doesn’t decrease poverty.
4. If d₁ < 0 and d₃< 0, it denotes that remittances damps down poverty and so also financial Development offers necessary incentive for poverty reduction.

Technique of Analysis

The study utilized Dynamic Ordinary Least Squares (DOLS) approach propounded by Stock and Watson [51]. The choice of the approach is hinged on the following: with the possibility of causal relationship between migrant remittances and poverty and the comparatively small observation of this study, the DOLS approach assists to deal with the menaces of simultaneity, endogeneity and small sample biases via the integration of leads and lags of differenced explanatory variables into cointegrating vector equations. Secondly, it possesses inbuilt apparatus to thwart serial correlation obstacles that frequently crop up in time series study. Third, it possesses the mechanism to integrate non-stationary variables, specifically variables that turn out to be stationary at first difference [51]. Fully Modified Ordinary Least Square (FMOLS) and Canonical Cointegrating Regression (CCR) methods are also utilised in order to verify and confirm stability of the DOLS results. Thus, the DOLS model is specified below:

Data Sources, Measurement and Descriptions

Accounted for financial development in our modelling framework by adopting financial development index as well as its three features (financial institutions depth index, financial institutions access index and financial institutions efficiency index). As succinctly spelt out by [21,47]. Development of financial institutions, instruments, markets and intermediaries will enhance remittance inflows and embolden the senders and recipients to send, save and invest it into profitable investment. Regarding our set of control variables, following [19,20,6]. We added gross fixed capital formation, human capital development, and real GDP and trade openness. In the first instance, investment on human capital via education and health is one of the best strategies for poverty reduction [25]. Also, real GDP represents country’s economic output that mirrors the income per head. Nation with risen real GDP is anticipated to boost investment which indicates economic prospects that will twinkle down to poverty reduction [26]. Similarly, trade openness encapsulates the degree of outward or inward orientation of countries in respect of their trading activities. It enhances a country’s imports and exports, boost private sector economic activities, brings about more employments and reduces poverty rate [53]. Based on the extant literature and theoretical clarification which underpins the significance of these variables in poverty reduction process, the coefficients of the above variables are all anticipated to exhibit negative effect on poverty. Thus, data sources, measurement and descriptions are well presented in Table1.

Table 1: Variables and data used in the analysis.