Appraising The Relationship Between Foreign Aid On Economic Growth In Nigeria

Abstract

This paper examines the impact of foreign aid on economic growth and poverty reduction in Nigeria, using the Autoregressive Distributed Lag (ARDL) technique for regression analysis. The study employs time series data from 1986 to 2020 to analyze the long-run and short-run relationship between foreign aid, economic growth in Nigeria. The study adopted the combined theories of economic growth of the Harrod-Domar Model, the Two-Gap Model and the Three- Gap Model in theoretical outlook. The data set is used to test the long-term relationship as well as the short-term relationship. The results show that foreign aid has a positive and significant impact on economic growth and poverty reduction in Nigeria in both the long-run and short run. The study concludes that foreign aid can be an effective tool for promoting economic growth and poverty reduction in Nigeria. The study recommended that in targeting aid towards infrastructure development, foreign aid can be used to fund infrastructure projects like building and upgrading roads, ports, and power plants to create jobs and increase economic activity. It also recommended investing in education and healthcare, foreign aid can be used to support education and healthcare initiatives, to improve the overall health and well-being of the population and increase productivity.