Analysis of Drivers of Incidences of Poverty in Nigeria

Abstract

Poverty is a phenomenon that affects all nations irrespective of the mark they’ve attained on the development continuum. The urgent need to address poverty has been in the fore front of developmental goals of both the developing and developed nations. Several studies have been carried out in this regard but most of the emphases had been on the effects of poverty on an economy. Our research interest here is tilted more to the casual factors of poverty as opposed to its effects because it is only when an illness has been clinically diagnosed that the right medications could be administered. The study relied on secondary data spanning through the period 1990 to 2014. While Dickey–Fuller unit root tests were used for preliminary analysis; ordinary least square (OLS) regression analysis was used to estimate the model in the short run. A combination of Johansen Co-integration and a VAR analysis were used for long run estimation. All the tests confirmed the veracity of our models. Findings of the study indicate that; Gross fixed capital formation (GFCF), National savings per capita (NS_PC), National Income per capita(NI_PC) and National consumption per capita (NC_PC), all had an inverse relationship with the prevailing level of poverty in Nigeria at both the short and long runs, though not statistically significant. On the other hand, Gross domestic product per capita (GDP_PC) and the lagged value of Poverty index (PI) in periods one and two had a positive relationship with the prevailing level of poverty in the long run. The implications of above results are that an increment in the level of Gross fixed capital formation, National savings per capita, National income per capita and National consumption per capita will bring about a decrease in the prevailing level of poverty in Nigeria at both the short and long runs. The above results also infer that the present level of Gross domestic product per capita encourages poverty in Nigeria. What this simply means is that productivity per head in Nigeria is rather low and poverty inducing. Lastly, the lagged values of poverty index are positively related to poverty. This is a pointer to the fact that the level of poverty in Nigeria is helping to perpetuate poverty in the land. The above result goes to affirm that, the Nigerian society is poor because her citizenry earns a low income. A low income translates to a low saving; the low level of savings translates into low investments, while the high levels of consumption means that, we’ve acquired a taste and penchant for what we cannot produce and sustain locally. Since our investment profile is low, it means that there is not enough capital to induce investments. This low investment in turn means little ability of the society to expand on its productive frontiers . This eventually culminates into low level incomes in the economy. The findings of study are in tandem with Nurkse’s theory on poverty. The study therefore recommends that for Nigeria to break the vicious circle of poverty in the land, she has need to engage in an investment–led poverty reducing employment paradigm..The present efforts at poverty alleviation involving the procurement and distribution of a significantly discounted 3-wheel passenger vehicles to the unemployed youths are not enough. These are mere palliatives ! It goes beyond this as there are underlying and basic fundamental issues that need be addressed. The Nigerian nation needs to invest more in order to increase her low level of fixed capital formation. This in turn is expected to enhance her growth potentials. Nigerians are expected to be discreet in their consumption pattern. It is not economically viable nor healthy to develop a penchant for imported goods. Lastly; there is need for a paradigm shift. We must play down on the continued dominance of primary production, export and low value addition. Nigeria’s economic growth need to be driven by a diversified production structure essentially driven by growth in manufacturing that would deliver lots of jobs, raise productivity and incomes; else it will remain trepid, fragile and susceptible to negative shocks. Poverty is likely to persist in Nigeria without a robust manufacturing sector.

Keywords: National savings per capita, National consumption per capita, Gross Domestic Product per Capita, National income per capita.