Impact of Poverty on Economic Growth in Nigeria: A Causality Approach

Abstract

The paper examined the impact of poverty on economic growth in Nigeria: a causality approach from 1980-2012. It specifically examined the trend of poverty and also investigated causal relationship between poverty and economic growth in Nigeria using descriptive approach and Granger Causality test. The line graph showed that poverty rate fluctuated in Nigeria The rate of poverty for Nigeria was highest in 2002 with a value of 80 percent and lowest value of 28 percent was experienced in the year 1980. The Granger Causality test also revealed that there was one-way flow of benefits (uni-directional relationship) between poverty and welfare, corruption to poverty, poverty to pattern of income distribution, poverty to economic growth and poverty to investment in Nigeria. On the other hand, there was two-way flow of benefits (bi-directional relationship) between poverty and life expectancy, and between investment and poverty in Nigeria. Other variables failed to granger cause each other. The paper concluded that it was only poverty that influenced economic growth while economic growth refused to Granger cause poverty which indicated that benefit of growth does not trickle down to the poor in Nigeria. The paper therefore recommends that policies that will enable the benefits of growth trickled-down to the poor should be put in place in Nigeria and that government should redistribute income in favour of the poor in Nigeria.