Influence of Poverty on Economic Growth Trajectory in Nigeria

Abstract

Nigeria has experienced several periods of economic growth; however, poverty is still widespread, and the growth-poverty dilemma is persistently featuring in the country's development experience. This paper examined the impact of poverty on economic growth in Nigeria from 1980 to 2024. Human capital theory and Capability Approach are pivotal to this study. Economic growth was represented by the annual growth rate of real GDP per capita, while poverty was represented by the national poverty headcount ratio, inflation, labour force participation and the youth population share are control variables. After confirming the mixed order of integration of the series using Augmented Dickey-Fuller unit root tests, the Autoregressive Distributed Lag (ARDL) bounds-testing procedure was used, and the Johansen cointegration test and Pearson correlation analysis were used as auxiliary tests. The ARDL bounds test validated the stable long-run cointegrating association between poverty and economic growth. The long-run estimates revealed that 1 percent rise in the poverty headcount ratio leads to 0.38 percent fall in the growth rate of GDP per capita. Furthermore, the error correction term showed that about 61 percent of the deviation from the long-run equilibrium is corrected within one year. Labour force participation and the youth population share were positively related to growth, while inflation had a further significant drag on growth. The paper concluded that poverty is a binding constraint on Nigeria's long-run growth trajectory and recommends the scaling-up of targeted social protection and macroeconomic stabilisation and labour-market development.