Poverty and Economic Growth Nexus in Nigeria

Abstract

The poverty situation in Nigeria has continued to attract the attention of the general public and various successive governments in the country over the years. It is worrisome that the poverty rate in the country has continued to rise despite the rising GDP. This study examined the impact of rising GDP on poverty reduction in Nigeria for the period 1982-2019. This is to identify whether the growth in Nigerian economy is pro-poor. Annual time series data on poverty rate, GDP growth rate, Gini coefficient (which measures inequality) and gross fixed capital formation (for domestic investment) are the variables used for the analysis. A dummy variable for democracy is also constructed to test for the impact of governance on poverty reduction in Nigeria. Autoregressive Distributed Lag (ARDL) model is adopted in the estimation procedure. The empirical results show that GDP growth rate, which measures economic growth, has negative and significant impact on poverty rate in the short run. However, its impact on poverty rate is positive and significant in the long run. Inequality has positive and significant impact on poverty rate both in the short run and in the long run. Thus, increase in inequality dampens the impact of growth on poverty reduction in Nigeria. Gross fixed capital formation has negative and significant impact in poverty rate both in the short run and in the long run. Democracy has negative and significant impact on poverty rate in the short run while in the long run, its impacts becomes positive and significant. The implication is that growth in Nigeria is not pro-poor. Based on the findings, it is recommended that the poverty reduction initiatives by the government should be geared towards providing jobs opportunities for the poor in order to boost their income.