REMITTANCE, FOREIGN AID AND POVERTY LEVEL: A COMPARATIVE ANALYSIS BETWEEN NIGERIA AND SOUTH AFRICA.

The persistent poverty challenges in Nigeria and South Africa from 1980 to 2024, emphasizing how remittances and foreign aid have become crucial financial inflows in both countries. It highlights the stark structural economic and socio-political differences between the two nations that frame their poverty landscapes. Nigeria experiences high rural poverty exacerbated by governance issues and economic volatility, while South Africa faces entrenched inequalities rooted in its apartheid legacy. The use of Augmented Dickey-Fuller unit root tests, Johansen cointegration tests, and Fully Modified Ordinary Least Squares (FMOLS) was use to analyze the long-term relationships between poverty, remittances, foreign aid, exchange rate, and inflation in both countries. The methodology confirms data stationarity and the existence of stable long-run equilibria, justifying the econometric approach and supporting robust inference. Empirical findings show that remittances have a statistically significant negative effect on poverty in both Nigeria and South Africa, increasing household incomes and resilience, particularly in rural Nigeria. Foreign aid, conversely, has a positive and significant association with poverty in Nigeria, indicating inefficiencies and governance challenges. Exchange rate depreciation significantly worsens poverty outcomes in Nigeria but has varied effects in South Africa. Inflation reduces poverty in Nigeria but has an insignificant impact in South Africa. These differences highlight the contextual nuances influencing the effectiveness of external financial inflows. The study concludes that while remittances serve as a reliable mechanism to reduce poverty in Nigeria and South Africa, foreign aid’s impact is constrained by institutional factors and governance quality unique to each context. It recommends formalizing remittance channels to increase inflow efficiency, improving institutional frameworks to maximize foreign aid benefits, and tailoring poverty reduction strategies to account for each country’s socio-economic realities. Maintaining macroeconomic stability, particularly exchange rate stability, is also emphasized as a critical factor for poverty alleviation success.