Kehinde Emmanuel Agbeni, Charity Okonkwo Chukwu, Anya Adebayo Anya, Mercy Oluwabusayo Donatus

Analysis of Factors Affecting Economic Growth and Poverty in Nigeria: A Panel Data Approach

Introduction

Analysis of factors affecting economic growth and poverty in nigeria: a panel data approach. Analyzes factors affecting economic growth and poverty in Nigeria. Panel data reveals investment boosts GDP and government spending reduces poverty, despite population & exchange rate challenges.

Abstract

Purpose - This study examines the key factors influencing economic growth and poverty reduction in Nigeria, with a focus on investment, government spending, exchange rates, infrastructure, and population dynamics. It explores how these variables interact to shape poverty outcomes in the Nigerian context. Design/methodology/approach - The study employs panel data regression analysis using secondary data from the Central Bank of Nigeria, World Bank Development Indicators, and National Bureau of Statistics, covering 1990–2022. Path analysis was used to capture both direct and indirect effects. Key regression results show that investment significantly drives GDP growth (β = 0.312, p < 0.05), while government spending positively impacts poverty reduction through its effect on output. However, population growth exerts pressure on poverty levels, weakening the gains from GDP growth. Originality - Unlike previous studies that often treat growth and poverty separately, this paper integrates the two, offering fresh empirical insights into how macroeconomic variables simultaneously influence Nigeria’s growth-poverty nexus. Findings and Discussion - The findings indicate that expansion in investment and infrastructure improves growth outcomes, which in turn reduce poverty. For example, the regression shows that a 1% increase in investment raises GDP by 0.35%, while a 1% rise in government expenditure reduces poverty incidence by 0.22%. Yet, persistent exchange rate fluctuations and high population growth counter these gains, limiting poverty reduction. Conclusion - The study concludes that targeted investment, stable fiscal policies, and stronger infrastructure development are essential to accelerate growth and achieve poverty reduction in Nigeria. Policy reforms should address population pressures and exchange rate instability to ensure sustainable economic progress.

Review

This paper, "Analysis of Factors Affecting Economic Growth and Poverty in Nigeria: A Panel Data Approach," addresses a critically important and highly relevant topic for Nigeria, a country grappling with significant development challenges. Its primary strength lies in its integrated approach, which simultaneously examines the determinants of economic growth and poverty reduction. This is a significant improvement over studies that often treat these interconnected phenomena in isolation, offering a more holistic understanding of the Nigerian growth-poverty nexus. The use of a robust panel data regression analysis, complemented by path analysis, on a comprehensive dataset spanning over three decades (1990-2022) from credible sources like the CBN, World Bank, and NBS, lends considerable credibility to its methodological design and the potential reliability of its findings. The study effectively identifies several key macroeconomic variables influencing both growth and poverty outcomes. Its findings highlight the pivotal role of investment in driving GDP growth, with specific quantitative evidence (a 1% increase in investment raising GDP by 0.35%). Equally significant is the positive impact of government spending on poverty reduction, albeit indirectly through its effect on output. However, the analysis does not shy away from critical challenges, particularly underscoring how rapid population growth and persistent exchange rate fluctuations weaken the positive gains from investment and growth, thereby limiting overall poverty reduction. This nuanced perspective, capturing both accelerators and decelerators of progress, provides valuable empirical insights into the complex interplay of these factors within the Nigerian context. The policy implications derived from this research are clear and actionable. The study compellingly advocates for targeted investment, stable fiscal policies, and sustained infrastructure development as essential pillars for accelerating economic growth and achieving meaningful poverty reduction in Nigeria. Crucially, it also highlights the urgent need for policy reforms to address the structural issues of population pressure and exchange rate instability, recognizing them as critical barriers to sustainable economic progress. While providing a strong foundation, future research could potentially delve deeper into the *quality* and *allocation* of investment and government spending, and perhaps explore regional disparities within Nigeria, to offer even more granular and targeted policy recommendations.

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