Impact of Poverty on Economic Performance in Nigeria: Evidence from a Time Series Data (1990-2024)

Abstract

This study examined the impact of poverty on economic performance in Nigeria over the period 1990–2024. Specifically, the study investigated the effects of the poverty rate, human capital development, measured by the Human Development Index (HDI), the dependency ratio, and gross fixed capital formation on real gross domestic product (RGDP), which was used as a measure of economic performance. An ex-post facto research design was adopted, and annual secondary time-series data covering 35 observations were employed. The study utilised the Autoregressive Distributed Lag (ARDL) approach to examine both short-run and long-run relationships among the variables. The unit root test revealed that the variables were integrated at mixed orders of I (0) and I (1), making the ARDL technique appropriate. The results established the existence of a long-run relationship among economic performance, the poverty rate, human capital development, the dependency ratio, and gross fixed capital formation. The long-run estimates revealed that the poverty rate had a negative and statistically significant effect on economic performance, with a coefficient of -0.006617 and a probability value of 0.0006. The Human Development Index exerted a positive and statistically significant effect, with a coefficient of 3.813802 and a probability value of 0.0001, while gross fixed capital formation also had a positive and statistically significant effect, with a coefficient of 0.118717 and a probability value of 0.0001. In contrast, the dependency ratio had a positive but statistically insignificant effect on economic performance, with a probability value of 0.9334. The error correction coefficient of -0.623497 indicates that approximately 62.35 per cent of short-run disequilibrium is corrected annually towards long-run equilibrium. The reported diagnostic tests further indicated that the model was statistically adequate. The study concludes that poverty constitutes a significant constraint on Nigeria's economic performance, while human capital development and productive capital formation are important drivers of long-run economic performance. It therefore recommends stronger poverty-reduction programmes, increased investment in education and healthcare, employment creation, and policies that encourage productive investment and capital accumulation.