Role of Diaspora Investment in the Economic Development of Sub-Saharan Africa: Evidence from Nigeria

Abstract

Diaspora investment encompassing remittances, diaspora direct investment, diaspora bonds, and diaspora-led entrepreneurship has become one of the most consistent sources of external finance available to Sub-Saharan African economies, frequently exceeding official development assistance and rivalling foreign direct investment in scale (Ngundu & Baum, 2025). Using Nigeria as a reference case, this study examines the extent to which diaspora investment contributes to economic development in Sub-Saharan Africa and identifies the channels through which this contribution occurs. The study is anchored on the New Economics of Labour Migration (NELM) theory and the Two-Gap (savings-investment gap) theories, which explain diaspora capital flows as both a household risk-diversification strategy and a macroeconomic gap-filling mechanism. Adopting a desk-based analytical design, the article synthesises secondary time-series data from the Central Bank of Nigeria (CBN) and the World Bank’s Migration and Development Briefs (2015–2024) alongside a comparative review of recent Autoregressive Distributed Lag (ARDL) empirical studies on remittances, foreign direct investment, and Nigerian economic performance. Findings show that diaspora remittances to Nigeria have remained the largest and most stable component of the country’s non-oil external finance, averaging over USD 20 billion annually since 2015, although empirical evidence on their long-run growth effect is mixed, with some studies reporting significant positive effects and others reporting adverse macroeconomic consequences such as exchange-rate appreciation. The study concludes that diaspora investment holds substantial development potential for Nigeria and Sub-Saharan Africa, but that this potential remains under-exploited because policy attention has been skewed towards remittances rather than the broader diaspora investment ecosystem. It recommends deepening diaspora bond instruments, formalising remittance channels, and establishing diaspora-targeted investment vehicles as policy priorities.