POVERTY REDUCTION, INSTITUTIONS AND THE NIGERIAN ECONOMY

Abstract

The prime goal of the United Nations is to reduce poverty to the barest minimum in all economies of the world. Africa seem to be worst hit by poverty. Nigeria, has also experienced the consequences of poverty in the forms of kidnapping for money, extortion and so on. Although Nigeria has recorded growth in the economy over time, such growth has not succeeded in transforming the economy. This study therefore sets out to examine the relationship between poverty reduction and economic growth through the channel of institutional quality. Trickle-down theory formed the basis for the study which covered the period 1990-2019. Correlation analysis, Granger-causality as well as the Autoregressive Distributed Lag model were used. The study found that an inverse but weak relationship exists between poverty reduction and economic growth. Also, a unidirectional flow exists from voice and accountability (an indicator of institutional quality) to poverty reduction. Moreover, the study found a strong but negative influence of the rule of law on poverty reduction. Therefore, enforcement of law and order is crucial to poverty reduction in Nigeria. In addition, government expenditure on health has had positive impact on poverty reduction, while government expenditure on education has had negative impact on poverty reduction. Hence, government investment in providing more health facilities will help to reduce poverty in Nigeria. However, government should reconsider public spending on education in Nigeria. Government intervention in education should be limited to regulation and the provision of those educational facilities that face the free-rider problem.