AN ANALYSIS OF THE POVERTY-GROWTH –INEQUALITY –NEXUS IN NIGERIA- 1992-2010

AN ANALYSIS OF THE POVERTY-GROWTH –INEQUALITY –NEXUS IN NIGERIA- 1992-2010

ABSTRACT

The issue of poverty is posing serious threat to the development of the Nigerian economy. Growth was seen as the driving force for poverty reduction by studies carried out in the 1980s. But, recent attention has now been shifted to the role of income distribution in reducing poverty since the yield of growth may not be equally shared and poverty not reduced. However, a distinct conclusion is yet to be established on the role of inequality in poverty reduction. Analysis on Poverty growth and inequality has received much attention among scholars, both in Nigeria and various other economies of the world. However,there seems to be a gap in literature on the flow of the triangle and the possibility of the previous levels of poverty, growth and inequality influencing the relationship of the triangle. Therefore, this research investigated the poverty- growth-inequality-nexus in Nigeria, using state data for 1992 to 2010 in a four year round panel framework. The study employed a dynamic simultaneous equation model while the Fixed Effect, Panel Least Square, First Difference Generalized Method-of-Moments and the System Generalized Method-of-Moments (GMM) econometric estimation techniques were used in the estimation of the model. The result from the study proved the System Generalized Method-of-Moments of estimation to bethe best approach in analyzing the interaction among poverty growth and inequality in Nigeria rather than the other methods.The result of the empirical study revealed that growth is positively and significantly related to poverty andthere was a negative and significant effect of income inequality on poverty. Poverty was found not to have any significant effect on growth and inequality. Poverty was positively related to growth and negatively related to inequality. The result of the study further showed that there is a positive feedback relationship between growth and inequality. States with high previous poverty levels tend to experience higher present levels of poverty and states with high previous levels of growth tend to experience higher present level of growth. The result of the study also showed that unemployment and literacy rates were critical determinants of poverty levels. Deliberate effort of the government in redistributing income is highly recommended to ensure poverty reducing impact of growth in Nigeria. Also, the need for unemployment reduction as a major part of policy measures aimed at poverty reduction in Nigeria is highly recommended for effective poverty reduction in Nigeria.