Does economic growth, external debt, and institutional quality promote poverty and income inequality in Nigeria?

Magaji Ibrahim  Yakubu; Samson Adeniyi  Aladejare

doi:10.59400/fefs1806

Magaji Ibrahim Yakubu Department of Economics, Federal University Wukari, Taraba State, Wukari 660001, Nigeria
Samson Adeniyi Aladejare Department of Economics, Federal University Wukari, Taraba State, Wukari 660001, Nigeria

Article ID: 1806

39 Views, 31 PDF Downloads

DOI: https://doi.org/10.59400/fefs1806

Keywords: poverty; income inequality; economic prosperity; government effectiveness; foreign debt; Nigeria

Abstract

The United Nations sustainable development goal 10 (SDG10) aims to reduce inequality and by extension poverty within and between countries. However, issues of economic growth, external borrowing, and institutional quality could clog efforts at realising SDG10, particularly in a developing country. Thus, this study assessed the effect of economic growth, foreign debt, and institutional quality on poverty and income inequality in Nigeria between 1990 and 2022. The research applied the autoregressive distributed lag (ARDL) technique in its empirical analysis. Findings from the study indicated that economic prosperity does not have significant long-run impact on poverty and inequality. However, the short-run relationship showed that economic growth increases inequality in Nigeria. Foreign borrowing was revealed to further aggravate poverty and inequality in the long-run. Also, while government effectiveness demonstrated an enhancing effect on poverty in the short and long-run periods, its long-run impact on inequality is significantly decelerating. Thus, based on the aforesaid conclusions the study recommends the strengthening of small and medium enterprises through access to finance at lower interest rates and equitable distribution of national wealth through the payment of a living wage, provision of social and economic infrastructure, etc. Also, the agricultural sector should be made more attractive to the youths through encouraging export promotion policies. Leveraging financial technology, and encouraging start-up firms can further reduce the poverty and the inequality level in the country.

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