Poverty, Income Inequality and Economic Growth in Nigeria (1981-2019)

Abstract

This study empirically examined the relationship between poverty, income inequality and economic growth in Nigeria. The study used time series data from National Bureau of Statistics (NBS) and Central Bank of Nigeria (CBN) Statistical Bulletin between the periods from 1981 to 2019. The study employed the use of Augmented Dickey Fuller test, Co integration test and Error Correction technique. The unit root test results indicated that all the variables were stationary at first difference and co-integration test confirmed a long run relationship among the variables. The error correction model shows that about 96 percent of the discrepancy between the actual and the equilibrium value of economic growth is corrected or eliminated each year. The coefficient of determination (R2) is 0.68 which shows that about 68 percent variations in the economic growth were explained by the independent variables. Furthermore, the Breusch-Godfrey Serial Correlation LM Test shows that the probability of the chi-square (2) is 0.2775 and this is greater than 0.05 at 5% significance level. This therefore confirms the absence of serial correlation. Also, the Breusch-Pagan-Godfrey Heteroscadaticity test indicates that the probability of chi-square (5) is 0.1242 and this is greater than 0.05 at 5% significant level. This also confirms the absence of heteroscedasticity in the model. From the study, the findings revealed that income inequality has a negative relationship with economic growth in the country while poverty was found to be positively related to economic growth. Similarly, the findings also revealed that poverty and income inequality has an insignificant effect on economic growth in Nigeria. Based on the findings, it can be concluded that poverty and income inequality has not significant relationship with economic growth in Nigeria. Thus, the study concludes that there is need for government of the country to come up with an all-inclusive policy and programme that will be targeted to the poor and give them ample opportunities to improve their welfare.