Economic Growth and Poverty Reduction in Nigeria: An Empirical Investigation

Abstract

Economic growth is said to be pro-poor if the poverty measure adopted falls with increased growth rate. Poverty researchers have investigated this phenomenon mainly in the context of income poverty. The fact that poverty goes beyond income has received little attention. This study appreciates the multidimensional nature of poverty. It sees poverty in its non-income dimension, highlights the concept of pro-poor growth, and also empirically analyzes if economic growth in Nigeria is, or could be, pro-poor. In our empirical analysis a vector autoregressive model was formulated and estimated within an error correction framework. Within this framework, we have analyzed annual time series data to capture, quantitatively, the effects on human-capital poverty of economic growth and other control variables, both in the short- and long-term. Results showed that in the medium-to-long term, agricultural development raised human capital poverty, while developing the other sectors of the economy reduced it. In the short-term, public capital expenditure on social services, including credit to the agricultural sector, and agricultural development generally, showed a potential to reduce poverty. Public capital expenditure on economic services, growth in the non-agricultural sector of the economy, and increased urbanization intensified the incidence of human capital poverty. These results indicate that government expenditures on human capital development through the social services sector tend to reduce human-capital poverty. They underscore the desirability of adequate capital expenditures on education and health; and also suggest the need for enhancing the pace of rural transportation with a view to creating non-agricultural employment opportunities and minimize the rate of urban growth.

Key words: Economic growth, Pro-poor growth, Human-capital poverty, Public expenditure, Urbanization.