ECONOMIC GROWTH AND POVERTY INNIGERIA: IS GROWTH PRO-

POOR, EVIDENCE FROM EXISTING DATA SETS

BY

JOHN MARK

REG.NO:17U/430185

BEING A FINAL YEAR PROJECT SUBMITTED TO THE

DEPARTMENT OF ECONOMICS, ADAMAWA STATE
UNIVERSITY, MUBI IN PARTIAL FULFILMENT OF THE
REQUIREMENT FOR THE AWARD OF BACHELOR OF SCIENCE
DEGREE IN ECONOMICS (B.Sc. HONS)

JULY, 2023

i
 DECLARATION

I, John Mark hereby declare that this project titled “ECONOMIC GROWTH

AND POVERTY INNIGERIA: IS GROWTH PRO-POOR?

EVIDENCEFROM EXISTING DATASETS under the supervision of Mr.

Lamba Slemem is an outcome of my original research and to the best of my

knowledge has not been presented anywhere for publication or award of a degree.

All sources of information used for this project have been duly acknowledged by

means of references.

---------------------------- -------------------------------

John Mark Date

No.17U/430185

ii
 DEDICATION

I dedicate this project to Almighty God for his mercies, goodness, protection and

provision throughout my program, to my Late parents, uncles, friends and relatives

and all whole wishers.

This project is dedicated to God Almighty who has granted me the opportunity and

support to complete this aspect of my academic program and to my beloved

parents who have been supportive throughout my life.

iii
 APPROVAL PAGE

This project by 17U/430185 has met the requirement for the Award of Bachelor of

Science Degree in Economics (B.Sc. Economics) of the Adamawa State

University, Mubi and Approved for its contribution to knowledge.

................................ …........................

Mr. Lamba Slemem Date

(Project Supervisor)

................................ …........................

Dr. Adamu Yahaya Date

(Head of Department)

................................ …........................

Prof. Garba Ibrahim Sheka Date

(External Supervisor)

iv
 ACKNOWLEDGEMENT

My sincere gratitude goes to God Almighty for his guidance and protection

throughout my studies.

My special thanks goes to my project supervisor Mr. Lamba Slemem for

useful and constructive comments and guidance .I also want to thank and

appreciate the Head of Department Dr. Adamu Yahaya and other lecturers in the

department of Economics whose comments, contributions and suggestions helped

to sharpen the focus of this study :Prof. Omafa Moses Niyi Gbenga, Dr. Goodwin

Boniface, Dr. Adamu Jibrilla, Dr. Danjuma Ahmed, Mr. Lamba Slemem, Dr.

Ezekiel Mijah, Dr. Enam P. Abalis, Dr.Peter Amade, Mr. James Tumba Henry,

Mr. Philips Panothani, Mr. Collins Kwabe, Mr. Isaq Sa,ad, Mr. Nurudeen

Mohammed Arabo, Dr. Awal Muhammad, Mr. Abdullahi Jauro, Prof. Inuwa

Muhammad Dauda

Not forgetting the contributions of my uncles Mr. Samaila Bitrus Ndagra,

Barr. Dlama Bitrus Ndagra, Mr. Mbuguwa Joseph (BOBBY), Mr. Sunday

Luka,Miss.Laraba Bitrus Ndagra, Mr.Ndaram Kwada,this project work would not

have been completed without the assistance, contributions and Encouragement of

people too numerous to mention few. However the few ones I must mention have

in one way or the other boosted my morales during the course of this research and

throughout my undergraduate program, Hon. Paul Adamu Soma., Hon. Ezekiel

v
Tumba, Hon. Ezekiel Kwada, Mr. Markus, Mr. Amos Markus, Mama Asabe

Stephen, Mama Asabe Bitrus Zira, Mal. Muhammad Ali, Pst. Salam Sajo, Fatuwa

James, Rev. Nuhu Muttah Abba, Rev. Ishaya Skabiya, Pst, Ezekiel Joseph, Baba

Dalatu, Peace Joel, Ignatius J. Abba, Yohanna Yaghi and my families, relatives

and respected course mate.

vi
 ABSTRACT
Study examine the impact of economic growth on poverty reduction in Nigeria
from 1986-2020. The study is organized into five chapters. Both empirical and
theoretical literature were reviewed and the neoclassical as the theoretical anchor
of the study. Further analysis also suggests that poverty in Nigeria is
predominantly a rural phenomenon, with rural poverty increasing from
28.3percentin 1980 to 63.8 percent in 2004.The proportion of the urban poor also
rose from 17.2 percent in 1980 to 43.1percent in 2004.The result shows that rural
areas approximately 44.4 percent of households in 2004 could not meet their food
expenditure requirements, 19.4 percent could meet their food expenditure
requirements, but not the minimum expenditure to cover other basic needs. For the
urban households, 26.7 percent were not able to meet their required food
expenditure requirements while 16.4 percent could meet their food expenditure but
no other non-food basic expenditure needs. There should be improvement in the
quality of government spending in Nigeria. Fiscal policy expansion should tend
towards increasing the component of government expenditure that will lead to a
sustained growth and also an improvement in the standard of living of the citizens.
The Federal government should support value creation in critical sectors of the
Nigerian economy which employs large population like agriculture and industry in
order to make growth pro-poor .In order to be able to reap the benefits of a
positive external shock-there is a need to increase the level of competitiveness and
the productive capacity of the country.

vii
 TABLE OF CONTENTS
TITLE PAGE ……………..……………………………………………………….. i
DECLARATION............................................................................................................ii

APPROVAL PAGE.......................................................................................................iv

ACKNOWLEDGEMENT..............................................................................................v

ABSTRACT...................................................................................................................vii

TABLE OF CONTENTS............................................................................................viii

CHAPTER ONE.............................................................................................................2

1.1 Background of the study...........................................................................................2

1.2 Statement of the Problem.........................................................................................7

1.3 Research questions.................................................................................................11

1.4 Objectives of the Study...........................................................................................11

1.5 Scope of the study...................................................................................................12

1.6 Significance of the study........................................................................................12

1.7 Organizations of the Study.....................................................................................13

CHAPTER TWO..........................................................................................................14

LITERATURE REVIEW.............................................................................................14

2.0 INTRODUCTION..................................................................................................14

2.1 Conceptual Clarification.........................................................................................14

2.2 Theoretical literature...............................................................................................18

2.3 Poverty Reduction Strategies in Nigeria................................................................27

2.4 Review of Empirical literature...............................................................................33

2.4 Gap in the literature Reviewed...............................................................................39

viii
2.5 Theoretical framework...........................................................................................40

CHAPTER THREE....................................................................................................41

METHODOLOGY.......................................................................................................41

3.1 The model of pro-poor growth...............................................................................41

3.2 Poverty Equivalent Growth Rate (PEGR)..............................................................41

3.3 Data Sources...........................................................................................................41

CHAPTERFOUR.........................................................................................................43

DATA ANALYSIS AND PRESENTATION OF THE RESULTS.............................43

4.1 Dimension of Poverty in Nigeria............................................................................43

4.2 Poverty condition in Nigeria...................................................................................45

4.3 Poverty in urban and rural areas of Nigeria............................................................46

4.4 Growth Rate of Poverty in Nigeria.........................................................................48

4.5 Poverty decomposition in Nigeria..........................................................................50

4.6 Economic growth and poverty reduction in Nigeria..............................................51

4.7 Pro-poor growth in Nigeria.....................................................................................51

CHAPTERFIVE...........................................................................................................63

SUMMARY, CONCLUSION AND RECOMMENDATIONS..................................63

Summary of findings....................................................................................................63

5.2 Conclusion..............................................................................................................64

5.3 Policy Recommendations.......................................................................................66

REFERENCES.............................................................................................................68

ix
 CHAPTER ONE

1.1 Background of the study

Researchers in recent years have strong interest in examining the impact of

economic growth on poverty reduction. This has led to the establishment of

Millennium Development Goals, which has set poverty reduction as a fundamental

objective of development (Duclos & Verdier-Chouchane, 2010). According to the

authors, in their examination of the literature on the linkages between growth,

poverty and inequality, observed that there is often a relation between macro and

micro analysis. Shorrocks & Van der Hoeven (2004) were of the view that

although a search for general conclusions may seem natural at a macro level, it is

important that a careful micro work is needed to deal adequately with poverty

issues.

The World Bank and IMF have begun to stress that a central way of reducing

poverty is to boost GDP growth and in particular, strive to achieve pro-poor Gross

Domestic Product (GDP) growth. The Organization for Economic Co-operation

and Development (OECD) (2001) defined Pro-poor growth as growth that leads to

significant reductions in poverty. Whether GDP growth will automatically reduce

poverty, all depends on its relationship with inequality (Miles & Scott, 2005). The

authors state that if the benefits of GDP growth accrue only to the rich, then GDP

growth will boost inequality but leave poverty unaffected. It may even be possible

x
that GDP growth in a modern sector of the economy leads to declines in traditional

sectors where the poor are mainly based. In this case, GDP growth produces

widening inequality and higher levels of poverty immiserizing growth. Ijaiya,

Ijaiya, Bello & Ajayi (2011) stated that growth in the economy of any nation is a

clear indication of an improvement in the socioeconomic well-being of its people.

The African Development Bank (AfDB) (2008) report indicated that a

deterioration in the growth rate as shown in most developing countries is thus a

manifestation of the fall in the standard of living of the people that cumulates into

poverty.

According to James (2020) the concept of poverty has evolved in the history of

economic thoughts, witnessing different stages of transition since the 18th

century‖. The second transition in the evolution of the concept of poverty began at

the end of the colonial period with new awareness of the problem of poverty as it

afflicts developing countries. The post-colonial period has been characterized by a

deliberate transfer from the North to the South of the anti- poverty polices

development in Europe during the nineteenth and twentieth centuries. Poverty has

been traditionally understood to mean a lack of access to resources, productive

assets and income resulting in a state of material deprivation (Tona, Obianuju &

Uju, 2018).

Progress on poverty reduction has become a major measure of success of

xi
development policy. In the 1970s and 1980s, the pre-occupation was with growth,

the need to grow the economies and incomes. Growth was seen as a prerequisite

for improved welfare. Many developing countries in the 1986 implemented

Structural Adjustment Programmes (SAP) aimed at enhancing growth. Following

these programmes, many countries recorded positive real growth rates. The

development literature in the 1990s was dominated by the view that growth is

central to any strategy aimed at poverty reduction. Countries that made noticeable

progress on poverty reduction were those which recorded fast and high growth

rates (NBS, 2012).

According to Orajaka & Okoli (2018), the World Bank measures poverty as the

number of people living on less than $1 a day (using PPP exchange rates) and an

alternative measure of less than $2 a day. The authors were of the view that by any

standards, these are extremely low levels of income (not enough to provide clean

water, sanitation, and adequate food, let alone health and education). The World

Bank (2003) report noted that in 1998 more than 2.8 billion people were living on

less than $2 a day and nearly 1.2 billion on less than $1 a day. Even worse, the

number of people living in poverty has increased over time. Reducing world

poverty is a major policy aim, summarized in the United Nation‘s Millennium

Development Goals, which aim to reduce by half the proportion of people living

on less than $1 a day. This involves reducing poverty from 29% to 14.5% of world

xii
population and reducing the number of poor people from 1.2 billion to 890 million

by 2015 (Orajaka & Okoli, 2018).

According to Breunig & Majeed (2020), Africa is the only region of the

developing world in which the number of people living below the international

poverty line of $1.00 per day has increased in the last twenty-five years‖. The

author noted that in response, beginning in the early 1990s, changes in donor

objectives and behavior placed the poor at the center of development assistance

policy in Africa. Civil society organizations and aid agencies as diverse as

Britain‘s DFID and the Vatican, advocated developing strategies for pro-poor

growth in Africa.

In Nigeria during the last three decades, the country earned over US$300 billion

from crude oil alone. Today, this should have transformed into a huge socio-

economic development of the country. Instead, Nigeria‘s basic social indicators

now place her as one of the 25 poorest countries in the world (Akanbi and Du Toit,

2009). According to the authors, Nigerian economy has recorded a rising growth in

its GDP especially over the last decades but this has not translated into accelerated

employment and reduction in poverty among its citizens. The country witnessed a

fall in Gross Domestic Product (GDP) from an annual average rate of 10.5 percent

in 1985 to 3.2 percent in 2007 (Ijaiya et al, 2011). The African Development Bank

(AfDB) further study in 2010 noted that Nigeria also witnessed a decline in its per

xiii
capita income from US $1600 in 1980 to US $1160 in 2008. Within some 18 years,

Nigeria had declined from being a low middle income country and amongst the

fifty richest countries in the world to one of the 30 poorest (Blench, 2004).

The Nigerian Living Standard Survey (2019) report noted that poverty dropped

from 65.6 percent in 2004 to 57.8percent in 2019 while non-poor increased from

34.4 percent in 2004 to 42.2 percent in 2019. When this relative poverty measure

was further disaggregated to two levels of poverty, about 20 percent were core

poor, 38.1percent moderately poor and 42.2percent were non-poor. These equally

showed that 10 percent had moved from Core Poor to Moderate Poor while there

was no remarkable change in the moderate poor, which was 36.3 percent in 1996

and 38.1 percent in 2004.

Interestingly the Non-Poor increased from 34.4percent in 2004 to 42.2 percent in

2019 (NBS, 2012).

The NLSS (2019) survey report noted that in 2004 urban non-poor was 41.8

percent as against 64.7percent in 2018. This showed a remarkable improvement on

the consumption patterns of the urban dwellers. There was 3 percent positive

change in the moderate poor from 33.0 percent in 2004 to 29.8 percent in 2019.

The growing urban poverty noticed in 1996 has completely disappeared from

25.2percent in 1996 to 5.6 percent in 2004. Most importantly Rural Non-poor

moved from 30.7percent in 2004 to 35.9 percent in 2019.

xiv
The moderately poor also changed negatively from 38.2percent to 40.5percent in

2019 while the core poor of 31.6 percent in 2004 dropped to 23.6 percent. This

explains the rise of moderately poor persons.

Economic reform in Nigeria was taken to a higher platform with the launching in

mid-2004 of National Economic Empowerment and Development Strategy

(NEEDS). The package recognizes the fact that for economic reform to be

successful it must be anchored on institutional reform, hence the latter forms a key

component of NEEDS. This marks a notable departure from earlier reform efforts.

According to Federal Government of Nigeria (FGN) report (2004) NEEDS has as

its focus wealth creation, employment generation, poverty reduction, corruption

eradication and general value re-orientation‖. Like earlier reform packages, the

strategy considers economic growth as crucial to poverty reduction. A real gross

domestic product (GDP) growth rate of between 5 and 7 percent was the target for

the period 2004 to 2007, with non-oil GDP expected to grow at between 7.3 and

9.5 percent during the period.

1.2 Statement of the Problem

Many Economists would argue that igniting economic growth and sustaining it is

the surest and most sustainable way to fight poverty. Cross-country studies on

economic growth and poverty reduction indicate that a 1% increase in growth has

been associated on average with a 1.5% reduction in poverty (Hasan, Mitra &

xv
Ulubasoglu, 2007). The Asian Development Bank (ADB) (2004) report stated that

there is a great deal of variation in how much economic growth has reduced

poverty across countries and even within countries over different periods of time.

In statistical terms, the report noted that variation in economic growth can explain

only around 45% of the variation in poverty reduction. These two stylized facts‖

about growth and poverty linkages - that poverty reduction is closely associated

with economic growth but that this association is by no means perfect suggests two

challenges for policymaker (Hasan et. al., 2007). According to author, first what

are the policies that can ignite and thereafter sustain growth? Second, how does

one ensure that growth generates significant opportunities for the poor? To date,

poverty situation in Nigeria remains a paradox, at least from two perspectives.

Firstly, poverty in Nigeria is a paradox because the poverty level appears as a

contradiction considering the country‘s immense wealth. Secondly, poverty

situation has worsened despite the huge human and material resources that have

been devoted to poverty reduction by successive governments in Nigeria with no

substantial success achieved from such efforts (Ajisafe, 2016). According to the

authors, since poverty remains a development issue, it has continued to capture the

attention of both national governments and international development agencies for

several decades. Since the mid-1980s, reducing poverty has become a major policy

concern for governments and donor agencies in all poverty stricken countries,

xvi
Nigeria inclusive. Thus, to attain the objective of reducing poverty in Nigeria, the

preoccupation of the government has been the growth of the economy as a pre-

requisite for improved welfare. To this effect the government therefore initiated

several economic reform measures which include Economic Stabilization measures

of 1982, Economic Emergency Measures in 1985 and Structural Adjustment

Programme (SAP) in 1986. Components of SAP include market- determined

exchange and interest rates, liberalized financial sector, trade liberalization,

commercialization and privatization of a number of enterprises (Chisom & Adinde,

2017).

Specialized agencies were also established to promote the objective of poverty

reduction. These include Agricultural Development Programmes, Nigeria

Agricultural, Cooperative and Rural Development Bank, National Agricultural

Insurance Scheme, National Directorate of Employment, National Primary Health

Care Agency, Peoples Bank, Urban Mass Transit, mass education through

Universal Basic, Education (UBE), Rural Electrification Schemes (RES) among

others (Adigun, Awoyemi & Omonona, 2011). The recent effort is based on the

seven point agenda. Like earlier reform packages, the strategy considers economic

growth as crucial to poverty reduction. The major issues of the seven point agenda

include: power and energy, food security, wealth creation and transportation.

Others are land reforms, security and mass education.

xvii
There may have been increased polarization in income distribution, resulting in a

wider gulf between the poor and the rich, manifested in a disappearing middle

class in the Nigerian economy. Despite policy interventions in the past to correct

this abnormality, income inequality has increased the dimension of poverty

(Oyekale, 2007). Additionally, attention to the importance of income distribution

in poverty reduction seems to be growing. Whether growth reduces poverty, and

whether in particular, growth can be deemed to be ―pro-poor‖, depends, however,

on the impact of growth on inequality and on how much this impact on inequality

feeds into poverty (Araar & Duclos, 2007).

The rate of rising poverty in Nigeria has led to a number of empirical researches to

understand the link between economic growth and poverty reduction. These

research works (for example Adigun ,et al.2011, Akanbi & Du Toit, 2009; Orebiyi,

2008 and Osunubi, 2006) however, are one sided in the sense that they particularly

focused on how various government policies affect poverty reduction and not if the

growth performance are pro-poor. The argument in the theoretical literature on

whether a country should focus on achieving growth and thereafter ensure that the

pattern of its growth is pro-poor or focus on reducing poverty by ensuring that this

will lead to growth is still unclear and therefore requires further empirical works

especially for the case of Nigeria. This study is therefore designed to fill these gaps

by attempting to address the following research questions: why has the rate of

xviii
poverty been so high in Nigeria despite record increase in economic growth? What

is the nature of relationship between poverty and Economic growth in Nigeria? If

recorded economic growth cannot be translated into improved living condition of

the poor, what other measures of policy can be explored to reduce poverty and

how?

1.3 Research questions

This research work sought to answer the following research questions

i. What is the trend and pattern of economic growth and poverty in Nigeria?

ii. What is the impact of economic growth on poverty reduction in Nigeria?

iii. What is the causal relationship between economic growth and poverty

reduction in Nigeria?

1.4 Objectives of the Study

The main objective of this study is to explore the impact of economic growth on

poverty in Nigeria from 1986 to 2020. The specific objectives are:

i. Examine the trend and pattern of economic growth and poverty reduction in

Nigeria.

ii. Investigates the impact of economic growth on poverty reduction in Nigeria.

iii. Assess the causal relationship between economic growth and poverty

reduction in Nigeria.

xix
Research hypothesis

H0: There is no significant impact between economic growth and poverty in

Nigeria.

H1: There is no causal relationship between economic growth and poverty in

Nigeria.

1.5 Scope of the study

This study is limited to the Nigeria economy for the period of 1986-2020.

Although the research has reached its aim, there were some unavoidable

limitations.

1.6 Significance of the study

This research would contribute to the ongoing policy debate by identifying growth

patterns of the Nigerian economy and to what extent the poor benefit from

economic growth. In order to achieve this, it uses Nigerian household’s survey for

two periods 2018/2019 and 2020 to make an ex-post analysis of changes in

poverty. It therefore employs Kakwani, Khandker and Son (2004) framework

called Poverty Equivalent Growth Rate (PEGR) measure which utilizes unit record

data available for two periods. This measure of pro-poor growth according to the

authors, captures a direct linkage (or monotonic relation) with poverty reduction,

indicating that poverty reduction takes into accounts not only growth but also how

xx
benefits of growth are shared by individuals in society. The study would be a

reference material for those intending to do similar research.

1.7 Organizations of the Study

This work has been organized in five chapters as follows: Chapter one is the

general introduction which covers background of the study, statement of the

problem, objectives of the study, research questions, hypotheses, scope of the study

and organization of the study and operational definition of terms.

While chapter two is literature review and theoretical framework which comprises

the review of theoretical literature, empirical literature, summary of literature, gap

in the literature. Then chapter three is the methodology which centers on the

description of the study area, methods and sources of data collection, model

specification, methods of data analysis and contributions to knowledge.

Chapter four which is the data presentation and analysis will feature data

presentation, data analysis, and interpretation of the results and discussion of

findings.

The last is chapter five which will cover summary of the study, conclusion and

recommendations.

xxi
 CHAPTER TWO

LITERATURE REVIEW

2.0 INTRODUCTION

This is the chapter where both empirical and theoretical literatures related to the

research topic are reviewed in order to get the views and results some authors and

scholars have obtained.

2.1 Conceptual Clarification

Concept of poverty

Poverty is a condition in which a person or community is deprived of and or lacks

the essentials for a minimum standard of wellbeing and life (World Bank, 2011)

Poverty may be seen as the collective condition of poor people or of poor groups

and in this sense entire nation-states are sometimes regarded as poor. Although the

most severe poverty is in the developing world with evidence of poverty in every

region but in developed countries, examples include homeless people and ghettos.

Poverty is also a type of religious vow, a state that may be taken on voluntarily in

keeping with practices of piety (World Bank, 2011)

Poverty is the state of being in lack. It is the inability to meet basic needs. Poverty

is also the inadequacy of resources which are essential to meet basic human and

economic needs. Poverty is evident in various ways which include among others,

lack of income, inadequate food supply, lack of, or no access to education and

other essential amenities, shortage or unavailability of productive resources for

xxii
sustainable livelihood, malnutrition, ill-health, homelessness (Ijaiya et al. 2011).

Traditionally, the concept of poverty is viewed in terms of insufficient income

required to meet basic human necessities of life, like food, clothing, shelter and

other productive resources. However, the multi-dimensional nature of the concept

of poverty has revealed that poverty is more in-depth than lack of essential

amenities.

Classification of Poverty

Poverty can be classified based on different criteria as:

i. Absolute poverty: Refers to lack of minimum physical requirements for

existence;

ii. Relative poverty on the other hand refers to a situation in which a persons’

or households’ provision of goods is lower than that of others.

iii. Rural poverty is characterized by poor material condition, low level of

education, lack of infrastructures, poor health condition, underemployment, low

investment and high rural-urban migration.

iv. Urban poverty on the other hand is characterized by environmental

degradation, overcrowded accommodation, low per capita income, and other

problems associated with urban areas such as slums, ghettos and shanties

(Baghebo, 2018).

Poverty lines according to the Federal Republic of Nigeria (2001) represent the

xxiii
value of basic (food and non-food) need considered essential for meeting the

minimum socially acceptable standard of living within a given society. Poverty

lines can also said to be the minimum generally acceptable standard of living given

in unit of currency. Thus, any individual whose income or consumption falls below

the poverty line is regarded as poor. This means that there is a minimum acceptable

poverty line at which an individual income or consumption falls to be classified as

poor. It went further to state levels of line for varying categories of income thus:

The most common poverty line for international comparison is US$1 a day for low

income countries US$2 for middle income and US$4 for transition economies.

The poverty lines as stated could generate misleading ideas of poverty as most

countries’ currencies if converting to US$1 will give significant value for that

country to escape the poverty line. This presuppose that most countries have their

own poverty line reflecting different social, economic and climate condition to

effectively determine what an acceptable minimum income should be. On the other

hand, the report of the presidential panel on streamlining and rationalization of

poverty alleviation institution and agencies in Nigeria (1999) revealed the fact that

the national bureau of statistic may not have carried out its survey based on the

US$1 poverty line but based on the amount of naira required to procure a basket of

goods that meets FAO basic standard consumption for existence of 2,100 calories

per person per day.

xxiv
Poverty Alleviation Approaches

There are many approaches to poverty alleviation, some of which are:

a. Economic Growth Approach: Given the low labour absorptive capacity of

the industrial sector, broad based economic growth should be encouraged. This

should focus on capital formation as it relates to capital stock, and human capital.

Human capital formation has to do with education, health, nutrition and housing

needs for labour. This is obvious from the fact that investment in these facets of

human capital improves the quality of labour and thus its productivity. Thus to

ensure growth that takes care of poverty, the share of human capital as a source

growth in output has to be accorded the rightful place.

b. Basic Needs Approach: This calls for the provision of basic needs such as

food, shelter, water, sanitation, health care, basic education, transportation etc.

unless there is proper targeting, this approach may not directly impact on the poor

because of their inherent disadvantage in terms of political power and the ability to

influence the choice and location of government programmes and projects.

c. Rural Development Approach: this approach sees the rural sector as a unique

sector in terms of poverty reduction. This is because majority of the poor in

developing countries lives in the area. In addition, the level of paid employment in

this area is very low, this means that traditional measures of alleviating poverty

may not easily work in the rural sector without radical changes in the assets

xxv
ownership structure, credit structure, etc. emphasis in this approach to development

has focused on the integrated rural development modeling. This approach

recognizes a multi-dimensional and therefore requires a multi-pronged approach.

The approach aims at the provision of basic necessities of life such as food, shelter,

safe drinking water, education, health care, employment and income generating

opportunities to the rural dwellers in general and the poor in particular.

d. Target Approach: This approach favours directing poverty alleviation

programmes at specific groups within the country. It includes such programmes as

Social Safety Nets, Micro Credits, and School Meal programme

2.2 Theoretical literature

The OECD (2001) report noted that simple theory and empirical evidence indicate

that poverty reduction can be achieved by accelerating economic growth or by

changing the distribution of income in favor of the poor. The report further stated

that sustained economic growth reduces poverty. This is not to say, however, that

average income growth increases the incomes of the poor in every growth episode

in every country. Pro poor growth has been broadly defined by a number of

international organizations as growth that leads to significant reductions in poverty

(OECD, 2001).

xxvi
Linkage between Economic Growth, and Poverty Reduction

Page (2005) argued that an important strand of the literature on growth and poverty

reduction side steps the definitional debate. The author noted that it argues that

because on average, growth benefits the poor to the same extent it benefits the non-

poor, the distinction between growth and pro-poor growth as a public policy

objective is not practically relevant. Policies designed to maximize the rate of

growth in low income countries are likely also to be those that maximize the

growth of income of the poor. Page (2005) stated that it is difficult to argue that

sustained poverty reduction can be achieved alongside economic stagnation or

decline, the debate over pro-growth versus pro-poor strategies, hinges on the extent

to which the average relationship between growth and income distribution conceals

important variations that may, ultimately be addressed by public policy.

Islam (2004) stated that analysis of the relationship between economic growth and

poverty reduction has gone through various phases in the literature on

development. For example, an important premise of the very early theories of

development was that the benefits of economic growth would trickle down to the

poor. Since then, questions have been raised on the assumption of an automatic

link between growth and poverty reduction, and attempts have been made to

understand the mechanisms through which the benefits of growth may get

transmitted to the poor. Islam (2004) noted that following on the Kuznets (1955)

xxvii
hypothesis of an inverted U shape of the relationship between economic growth

and income inequality, Adelman and Morris (1973) was one of the earlier studies

to question the automaticity of the relationship between economic growth and

benefits to the poor and then the influential contribution by Chenery, Ahluwalia,

Bell, Dulloy and Jolly. (1974), focusing on the importance of redistribution

alongside economic growth.

Economic growth, however, came back to fashion once there were studies casting

doubt on the suggestion that higher growth could be associated with increased

poverty, and reasserting that growth, almost always, reduced poverty (Fields,

1980).The decade of the 1980s witnessed renewed emphasis (especially on the part

of the international development partners) on economic growth; but studies on

growth contributing to poverty reduction again came in good numbers during

recent years (Dollar and Kray, 2000). While growth continued to occupy the centre

stage in development literature, there have been studies, especially in recent years,

arguing that although growth is necessary for poverty reduction, it is not sufficient

(Islam, 2004). The author explains that some studies point out that the pattern of

growth is important from the point of view of its effectiveness in reducing poverty.

Pro-poor growth theory

Akanbi and Du toit (2009) stated that the last few decades have experienced

resurgence in both the growth theory (development of the endogenous growth

xxviii
models) and the pro poor growth models in the macroeconomic literature.

According to Domar (1957) ―The framework of neoclassical economics can be

viewed as a summation of the various contributions of authors to the model of

long-run economic growth‖. The Author noted that Solow (1956) made a huge

contribution to the growth theory in which he has been revered as the pioneer of

neoclassical growth model. The implications of the neoclassical growth model can

be viewed on a short and long-run analysis. In the short-run, policy measures like

the tax cuts will affect the steady-state level of output but not the long-run growth

rate. Instead, growth will be affected as the economy converges to the new steady-

state level of output which is determined mainly by the rate of capital

accumulation. This is in turn determined by the proportion of output that is not

consumed but is used to create more capital (Savings rate) and also the rate at

which the level of capital stock depreciate. This implies that the long-run growth

rate will be exogenously determined and the economy can be predicted to converge

towards a steady-state growth rate which depends on the rate of technological

progress and labor force growth. Therefore, a country will grow faster if it has a

higher savings rate (Akanbi and Du toit, 2009).

The modification of the neoclassical growth model can be greatly attributed to the

line of thoughts of Ramsey (1928), Cass (1965), and Koopmans (1965) which are

centered on social planning problem (not market outcomes) that uses a dynamic

xxix
optimization analysis of household‘s savings behavior which is taken as constant

fraction of income by Solow (Akanbi and Du toit,2009). Their basic assumption is

that agents in the community are identical and they live forever. This means that

they will maximize their utility over their life time. King and Rebelo (1990)

commented that the new growth theory which is also known as the endogenous

growth theory started gaining its feet firmly in the growth literature in the early

1980s. This came about as a response to series of criticisms with the assumptions

made in the neoclassical theory. They tend to discard the assumption of constant

returns to scale by replacing it with an increasing returns to scale and try to see

growth as being generated by variables that are been determined within the model.

So, technology and human capital are seen to be endogenous unlike the

neoclassical model that assumed these to be exogenous.

However, their main emphasis about the long-term growth is that they do not

depend on exogenous factors and most importantly is that the model gives room

for policies that tend to affect savings and investment. Focus (2007) stated that the

new growth theory has gained tremendous popularity over the past few decades

and their strength can be attributed to their ability to solve most of the limitations

of neoclassical growth models and the inclusion of some socio-economic factors

that will propel growth over the long run. The author argued that in neoclassical

and endogenous growth theories, an accelerated economic growth may not

xxx
necessarily be sustainable and translate into an accelerated economic development.

Most developing economies are characterized by structural supply (capacity)

constraints impeding the effects of any policy interventions targeted towards

increasing growth.

According to World Bank report (2006) ―It is expected that as an economy

grows, one would see a sinking effect as an improvement in welfare of its

citizenry. Meaning that, the growth of a country should have a huge positive

impact on its level of poverty‖. The report noted that there has been a controversy

on whether a country should focus on achieving growth and thereafter ensure that

the pattern of its growth is pro-poor or focus on reducing poverty by ensuring that

this will lead to growth. However, poverty can be viewed as a barrier to growth in

the sense that a country will not grow if they are poor.

This line of thought has opened the door to the existence of poverty trap where

poverty and growth interact in a vicious circle. Meaning that a high poverty level

will lead to low growth and low growth will also lead to high poverty level.

Akanbi and Du toit (2009) were of the view that it is imperative for any economy

experiencing a poverty trap to maintain a focus strategic macroeconomic policy

that would rely either on pro-growth or pro-poor since there is a bidirectional link

between growth and poverty. In addition, it will be difficult to experience growth if

the conditions of the poor are not addressed and also poverty will not decline if

xxxi
there is no growth. The World Bank report (2006) noted that there has been a

controversy on whether a country should focus on achieving growth and thereafter

ensure that the pattern of its growth is pro-poor or focus on reducing poverty by

ensuring that this will lead to growth.

Measuring Pro-poor Growth

The way the impact of economic growth on poverty is measured often dictates the

chosen policy intervention. The measured degree of pro-poorness of growth

depends to a large extent on the underlying concept. While the World Bank defines

growth as pro-poor when the increase in gross domestic product reduces poverty

(however small the reduction) (Ravallion 2004), the United Nations Development

Program (UNDP) only regards growth as pro-poor if the poor benefit

proportionally more than the non-poor (Pasha and Palanivel 2004). White and

Anderson (2001) subsume the different meanings of pro-poor growth by

comparing the variance of the poor‘s share of income to

(i) Their previous share,

(ii) Their share in the population, or

(iii) Some international norm (for example, a pre-specified poverty threshold).

The first definition is equivalent to that of the World Bank and is usually

considered the absolute definition of pro-poor growth. In that sense, growth must

xxxii
only fractionally reduce poverty to be called pro-poor even though the poor might

benefit proportionally less from growth than the non-poor. Policy intervention

concentrates on the macroeconomic level in order to directly influence gross

domestic product (GDP). The second meaning of pro-poor growth is used by

UNDP and includes an equality approach. It is usually considered the relative

definition and aims to minimize the gap between the mean incomes of the poor and

mean overall income. Hence, growth is pro-poor, relatively speaking, if it benefits

the poor proportionately more than the non-poor (Zepeda, 2004). This view

generally favors microeconomic policies that reduce inequality rather than a

concentration on overall economic growth. Consequently, the measured effects of

policy interventions vary with the definition of pro-poor growth. Recent empirical

studies show how a decrease in relative inequality is regularly accompanied by an

increase in absolute inequality.

In order to emphasize the dependence of outcomes on the definition of pro-poor

growth, McKay (2007) draws on the case of Vietnam. During the period from 1992

to 2003, the drop in overall poverty is considered to be pro-poor according to the

absolute definition. Using the relative definition, the same growth process cannot

be deemed pro-poor, since high income groups benefited relatively more than low

income groups. The reverse is true for the case of Indonesia during the period after

the financial crisis (1996-2002). There, albeit negative, growth was pro-poor in a

xxxiii
relative sense as inequality fell and, hence, the poor suffered relatively less than the

non-poor. However, it was not pro-poor with regard to the absolute definition,

since growth was negative and poverty incepts and thus define varying tools to

quantify the impact of growth on poverty. Among the concepts, the measurement

tools of UNDP and the World Bank are considered the most advanced. They have

also been the most influential for recent empirical research.

While the growth elasticity of poverty (GEP) only relates changes in poverty with

changes in per capita income, the poverty equivalent growth rate (PEGR) and the

rate of pro-poor growth (RPPG) include the dimension of the equality of growth.

PEGR captures the change in poverty when inequality changes without affecting

the real mean income. Thus, the estimated growth rate gives more weight to the

incomes of the poor (the weight depending on the specified threshold). The RPPG

is based on the concept of a ―growth incidence curve‖ (GIC) and marks the area

under the GIC up to the headcount ratio.4. If the RPPG exceeds the mean growth

rate, growth is judged to be pro-poor in its relative meaning. Hence, the measured

effects of a policy intervention not only vary with the definition of pro-poor growth

but even more with the applied measurement tool:

While the RPPG judges Thailand‘s growth experience pro-poor for the period from

1990 to 1996, the PEGR only does so for the last four years. Hence, according to

Zepeda (2004), RPPG overestimates Thai pro-poorness and therefore tends to

xxxiv
falsely judge poverty reduction strategies successful. In contrast, Ravallion (2004)

highlights the case of Chinese growth that reduced absolute poverty notably in the

period from 1980 to 2001. According to the PEGR, the Chinese experience is

judged more anti-poor than pro-poor. Hence, PEGR tends to underestimate the

Chinese pro-poorness and therefore tends to falsely spurn successful policy

strategies. While development practitioners and researchers suggest

multidimensional policy strategies to achieve pro-poor growth, only few academic

attempts have been made to integrate the multidimensionality of poverty in its

measurement. Grosse et. al. (2005) recently identified the exclusiveness of income

as an indicator for poverty as the crucial shortcoming of current pro-poor growth

concepts. They define poverty as a multidimensional phenomenon including social

indicators and then suggest, following Ravallion and Chen (2003), a non-income

growth incidence curve (NIGIC) that indicates the improvement of non-income

indicators (health, education, nutrition, and mortality) between two periods for

each percentile.

Poverty Reduction Strategies in Nigeria

To reduce poverty various schools of thought advocates a number of measures.

The Mercantilists laid emphasis on foreign trade which according to them is an

important vehicle for the promotion of economic growth and poverty reduction.

Ijaiya,

xxxv
Ijaiya, Bello and Ajayi (2011) explain that the Classical economists‘ (Adam

Smith, David Ricardo, Thomas Malthus, Karl Marx, etc.) views on poverty

reduction brought to fore the social changes brought about by technological

changes resulting from the industrial revolution that took place between 1750-1850

. The early development economists of the 1940s and the 1950s advocate the

theory of forced-drift industrialization via Big push, Balanced growth and Labour

transfer (Ijaiya 2002).

According to Ijaiya et. al. (2011). In the 1970s Chenery,et. al. (1974) advocates

redistribution of income‖. To them, poverty can better be reduced if radical

redistribution of income or land is allowed to take place in view of the interlocking

power and selfinterest of the rich and the bureaucracy in the handling of the

nations‘ resources (Ijaiya et. al., 2011). The World Bank (1991) emphasizes on the

need for stable macroeconomic policies and economic growth. To the World Bank,

sound fiscal and monetary policies will create a hospitable climate for private

investment and thus promote productivity which in the long-run would lead to

poverty reduction. This approach is what is referred to as pro-poor growth

approach to poverty reduction (Dollar and Kraay 2000).The 1980s to the 2000s had

witness the introduction of new strategies/approaches to poverty reduction. Key

among them are the basic needs and capabilities/entitlements approaches,

participatory development, social capital, community self-help, good governance

xxxvi
and human right approaches to poverty reduction (United Nations report, 2004).

In Nigeria, various efforts were made by the government, non-governmental

organizations and individuals to reduce poverty in the country. According to

Ogwumike (2001) poverty reduction measures implemented so far in Nigeria

focuses more attention on economic growth, basic needs and rural development

strategies. The economic growth approach focuses attention on rapid economic

growth as measured by the rate of growth in real per capita GDP or per capita

national income, price stability and declining unemployment among others, which

are attained through proper harmonization of monetary and fiscal policies. The

basic need approach focuses attention on the basic necessities of life such as food,

health care, education, shelter, clothing, transport, water and sanitation, which

could enable the poor live a decent life. The rural development approach focuses

attention on the total emancipation and empowerment of the rural sector.

Furthermore, Ogwumike (2001) grouped the strategies for poverty reduction in

Nigeria into three eras – the pre–SAP era, the SAP era and the democratic era. In

the pre-SAP era, the measures that were predominant were the Operation Feed the

Nation, the River Basin Development Authorities, the Agricultural Development

Programmes, the Agricultural Credit Guarantee Scheme, the Rural Electrification

Scheme and the Green Revolution. In the SAP era the following poverty reduction

xxxvii
measures were introduced; the Directorate for Food, Roads and Rural

Infrastructures, the National Directorate of

Employment, the Better Life Programme, the Peoples‘ Bank, the Community

Banks, the Family Support Programme and the Family Economic Advancement

Programme. The democratic era witnessed the introduction of the Poverty

Alleviation Programme (PAP) designed to provide employment to 200,000 people

all over the country. It was also aimed at inculcating and improving better attitudes

towards a maintenance culture in highways, urban and rural roads and public

buildings. By 2001 PAP was phased out and fused into the newly created National

Poverty Eradication Programme (NAPEP) which was an integral part of the

National Economic Empowerment and Development Strategy (NEEDS).

Concept of Economic Growth

Economic growth is an increase in the capacity of an economy to produce goods

and services, compared from one period of time to another. It can be measured in

nominal or real term, the latter of which is adjusted for inflation. Traditionally,

aggregate economic growth is measured in terms of Gross National Product (GNP)

or Gross Domestic Product (GDP), although alternative metrics are sometimes

used (Jhingan, 2003).Economic growth is the increase in the inflation –adjusted

market value of the goods and services produced by an economy over time. It is

xxxviii
conventionally measured as the percentage of increase in real gross domestic

product, or real GDP, usually in per capita terms (Jhingan, 2003). Growth is

usually calculated in real terms i.e. inflation adjusted terms to eliminate the

distorting effect of inflation on the price of goods produced. Measurement of

economic growth uses national income accounting. Since economic growth is

measured as the annual percent change of Gross Domestic Product (GDP), it has

all the advantages and drawback of that measure. The rate of economic growth

refers to the geometric annual rate of growth in GDP between the first and the last

year over a period of time. Implicitly, this growth rate is the trend in the average

level of GDP over the period, which implicitly ignores the fluctuation in the GDP

around this trend. An increase in economic growth caused by more efficient use of

inputs (such as labour productivity, physical capital, energy or materials) is

referred to as intensive growth. GDP growth caused only by increases in the

amount of inputs available for use (increased population, new territory) is called

extensive growth (Bjork, & Gordon, 1999).

Determinant of Economic Growth

According to Irfanullah (2016) determinants of economic growth are interrelated

factors that directly influence the rate of economic growth i.e. increase in real GDP

of an economy. These include the following: Natural resources, Human resources,

Capital goods, Technology and efficient use of resources. These are explained

xxxix
briefly below.

i. Natural Resources

Natural resources include anything that exist in nature and which has exploitable

economic value. Rate of economic growth increases on increase in quantity and

quality of natural resources, examples of natural resources which can have major

effects on the rate of economic growth include fossil fuels, valuable metals, oceans

and wildlife.

ii. Human Resources

Human resources include both skilled and unskilled workforce. Increase in the

quantity and quality of the workforce increases the rate of economic growth. Here,

increase in quality refers to improvement of skills the workers possess. When more

people work, more goods and services are produced and when more skilled

workers do a job, they produce high value goods and services.

iii. Capital Goods

Capital goods are tangible assets such as plant and machinery that can carry out

processes which result in the production of other goods and services. Capital goods

require big investment initially but they increases production and growth rate in

future periods.

iv. Technology

xl
Technology includes methods and procedures used to produce various goods and

services. New technology may be improved gradually by investing in research.

Better techniques once devised, allow faster production and increase rate of

economic growth.

v. Efficiency factor

Achieving high output to input ratio, is the result of efficiency. Efficiency includes

both productive and allocates efficiency. High efficiency increases growth rate

when it is coupled with full employment. To achieve maximum growth rate, an

economy must use its available resources in the least costly way to produce the

optimum mix of goods and services and it must use its resources to the maximum

extent possible.

2.4 Review of Empirical literature

Adigun et. al. (2011) analyzed income growth and inequality elasticity of poverty

in

Nigeria over a period of time using the secondary data obtained from National

Consumer Survey of 1996 and 2003/2004 Nigeria Living Standard Survey. The

study uses changes in mean per capita expenditure as a yardstick of economic

growth and adopts simple but powerful ratio estimates of Economic Growth and

Inequality elasticity of poverty. The result indicates that 1 percent increase in

xli
income growth will lead to 0.624 percent reduction in poverty. The inequality

elasticity of poverty shows that a decrease of inequality by 1 percent would have

decreased poverty by just 0.34 percent. The result implies that what matters for

poverty reduction is mainly accelerated economic growth, redistribution and

reductions in inequality

Ijaiya et. al. (2011) examined the impact of economic growth on poverty

reduction in Nigeria by taking into consideration a time subscript and a difference-

in-difference estimator that describes poverty reduction as a function of changes in

economic growth. Using a multiple regression analysis, the result obtained

indicates that the initial level of economic growth is not prone to poverty

reduction, while a positive change in economic growth is prone to poverty

reduction. The study suggest that to improve and sustain the rate of economic

growth in Nigeria from which poverty could be reduced measures, such as, stable

macroeconomic policies, huge investment in agriculture, infrastructural

development and good governance are to implemented

Ayala and Jurado (2010) discuss whether substantive differences exist in terms of

the distribution of economic growth by income groups in Spanish regions. They

use data from the Spanish Family Budget Surveys for various years to estimate

growth incidence curves, decomposition models of poverty changes, and is poverty

curves. Their result show that while economic growth in the long-term has meant

xlii
an improvement of the lower income percentiles in Spain, this improvement is not

uniform in the different regions

Akanbi & Du Toit (2009) develop comprehensive full-sector macro-econometric

models for the Nigerian economy with the aim of explaining and providing a long-

term solution for the persistent growth-poverty divergence experienced by the

country. A review of the historical performances of the Nigerian economy reveals

significant socioeconomic constraints as the predominant impediments to high and

sticky levels of poverty in the economy. As such, a model of the Nigerian economy

suitable for policy analysis needs to capture the long-run supply-side

characteristics of the economy. They incorporate price block to specify the price

adjustment between the production or supply-side sector and real aggregate

demand sector. The institutional characteristics with associated policy behavior are

incorporated through a public and monetary sector, whereas the interaction with

the rest of the world is presented by a foreign sector, with specific attention given

to the oil sector. They estimate the models using time-series data from 1970 to

2006 using the Engle-Granger two-step co-integration technique, capturing both

the long-run and short-run dynamic properties of the economy. They subject the

full-sector models to a series of policy scenarios to evaluate the various options for

government to improve the productive capacity of the economy, in order to achieve

sustained accelerated growth and a reduction in poverty in the Nigerian economy.

xliii
Agrawal (2008) examined the relation between economic growth and poverty

alleviation in the case of Kazakhstan using province-level data. Using Additively

Decomposable Poverty Measures, the study shows that provinces with higher

growth rates achieved faster decline in poverty. This happened largely through

growth, which led to increased employment and higher real wages and contributed

significantly to poverty reduction. Rapidly increasing oil revenues since 1998 have

helped significantly raise both gross domestic product growth and government

revenue in Kazakhstan. Part of the oil fund was used to fund a pension and social

protection program that has helped reduce poverty. However, expenditure on other

social sectors like education and health has not increased much and needs more

support. His empirical result shows that increased government expenditure on

social sectors did contribute significantly to poverty alleviation. The author

suggests that both rapid economic growth and enhanced government support for

the social sectors are helpful in reducing poverty.

Orebiyi (2008) assessed how oil production in the Niger Delta has impoverish the

people given the fact that the existing property right regime concedes the

ownership of all land and land resources to the federal government, to whom the

oil companies are responsible. Using Primary survey data, the Descriptive

Statistics shows that poverty could be linked to the prevalent property right regime

within a system. But there is no consensus regarding the most acceptable regime,

xliv
which could bring about an acceptable reduction in poverty.

Omer & Jafri (2008) assessed the impact of economic growth on absolute poverty

in Pakistan over the last four decades. Their study attempts to answer the relatively

ignored basic question: is economic growth in Pakistan pro-poor? In addition, an

attempt has been made to evaluate the distribution of income within poor, a step

necessary to determine the sensitivity of different income groups, below poverty

line, to the economic growth. They use Growth Incidence Curves a superior

poverty measure and calculation of the Rate of Pro-Poor Growth (RPPG) and the

Ordinary Rate of Growth (ORG). They find that economic growth in Pakistan is

not intrinsically pro-poor. Although it was pro-poor in the seventies and is also the

same in the current decade and strongly pro-poor in the eighties, a positive growth

in the nineties was, however, anti-poor. Their results show that the first docile is

most sensitive to economic growth and most vulnerable to economic shocks.

Osunubi (2006) noted that Nigeria is a nation that is endowed with both human and

material. However, due to gross mismanagement, profligate spending, kleptomania

and adverse policies of various governments of Nigeria, these resources have not

been optimally utilized; these resources have not been adequately channeled to

profitable investments to bring about maximum economic benefits. As a result of

the foregoing, Nigeria has been bedeviled with unemployment and poverty. She

notes that economic growth, which is supposed to be a solution to the problems of

xlv
unemployment and poverty, appears not to be so in Nigeria.

Oyeranti and Olayiwola (2005) evaluated policies and programmes for poverty

reduction in rural Nigeria. An examination of certain indicators of performance

indicate that the domestic and international poverty reduction measures have had

minimal impact in addressing the problems of poverty and also had insignificant

impact on the living conditions of the poor. Their measure indicates that the

strategies were badly implemented and even had no particular focus on the poor in

terms of design and implementation. The strategies try as much as possible to

create the opportunity and empower the poor, but they are found wanting in the

areas of pro-poor growth and resource redistribution. They note that the effort of

international agencies cannot be sustained due to lack of domestic supportive

measures to guarantee its sustainability. This is understandable from the fact that

states and local governments which have responsibilities for health care and

education at the grassroots level and programmes which affect poverty alleviation,

have much less share in the Federation Account. They stress that efficient design

of poverty reduction programmes in Nigeria requires that the poor must be

identified and targeted and policies adopted should be consistent and sustainable.

Timmer (2003) noted that no country has solved its problem of poverty through

agricultural development alone (much less through higher productivity for a single

commodity such as rice).At the same time, no country (except Singapore and Hong

xlvi
Kong) has solved its problem of poverty without creating a dynamic agricultural

sector. He states that the secret is a successful structural transformation where

agriculture, through higher productivity, provides food, labor, and even savings to

the process of urbanization and industrialization. This process raises labor

productivity, causes wages to rise, and gradually eliminates the worst dimensions

of absolute poverty. The process also leads to a decline in the relative importance

of agriculture to the overall economy. And no country has undergone a successful,

i.e. sustainable, structural transformation without substantial openness to the world

economy. Economists continue to debate the optimal sequencing and degree of

openness, but all agree that joining the global economy has the potential to

improve the efficiency of resource allocation and speed technological change,

which are the short-run and long-run sources of economic growth. He therefore

asserts that pro-poor economic growth is the basic vehicle for reducing poverty.

2.4 Gap in the literature Reviewed

A number of empirical researches to understand the link between economic growth

and poverty reduction have been conducted. These research works (for example

Adigun ,et al.2011, Akanbi and Du Toit, 2009; Orebiyi, 2008 and Osunubi, 2006)

however, are one sided in the sense that they particularly focused on how various

government policies affect poverty reduction and not if the growth performance are

pro-poor. The argument in the theoretical literature on whether a country should

xlvii
focus on achieving growth and thereafter ensure that the pattern of its growth is

pro-poor or focus on reducing poverty by ensuring that this will lead to growth is

still unclear and therefore requires further empirical works especially for the case

of Nigeria. This study is therefore designed to fill these gaps by attempting to

investigate the impact of economic growth on poverty in Nigeria from 1985 to

2021.

2.5 Theoretical framework

The neoclassical growth model was used as a rider in this study. The implications

of the neoclassical growth model can be viewed on a short and long-run analysis.

In the short-run, policy measures like the tax cuts will affect the steady-state level

of output but not the long-run growth rate. Instead, growth will be affected as the

economy converges to the new steady-state level of output which is determined

mainly by the rate of capital accumulation. This is in turn determined by the

proportion of output that is not consumed but is used to create more capital

(Savings rate) and also the rate at which the level of capital stock depreciate. This

implies that the long-run growth rate will be exogenously determined and the

economy can be predicted to converge towards a steady-state growth rate which

depends on the rate of technological progress and labour force growth. Therefore, a

country will grow faster if it has a higher savings rate (Akanbi and Du toit, 2009).

xlviii
 CHAPTER THREE

METHODOLOGY

3.1 The model of pro-poor growth

The model to be adopted for this research is the Poverty Equivalent Growth Rate

(PEGR) measure developed by Kakwani et.al. (2004). It takes into account not

only growth but also how benefits of growth are shared by individuals in a society.

As poverty reduction depends on both growth and the distribution of its benefits

among the poor and the non-poor, growth alone is a necessary but not sufficient

condition for poverty reduction

3.2 Poverty Equivalent Growth Rate (PEGR)

How does economic growth affect poverty reduction? To answer this, we need to

measure the factors that contribute in poverty reduction. According to Kakwani

et.al.(2004),―Poverty reduction depends on two factors. The first factor is the

magnitude of the economic growth rate: the larger the growth rate, the greater the

reduction of poverty. Growth is generally accompanied by changes in inequality;

an increase in inequality reduces the impact of growth on poverty reduction.

3.3 Data Sources

Data for this study was from the data bank of the National Bureau of Statistics

(NBS) and the Central Bank of Nigeria (CBN).The datasets used include those

with information on living conditions as well as standard of living to enable the

xlix
quantification of poverty and consequently, pro-poorness of growth. The study

used the Nigeria Living Standards Survey (NLSS) survey that was carried out for

twelve months from September 2003 through toAugust2004, households being

interviewed over seven visits. The total sample was 19,144 households.

The average household size in Nigeria is 4.79 persons, money amounts are in

Nigerian Naira. There are 14,512 rural household and 4,646 urban households in

the dataset. Also, the current survey conducted in 2008 was also used. The

Variables of interest and consideration include household socio-economic

characteristics, employment statistics, geographic locations and regions,

percentage of people in different income levels, percentage of people in different

age ranges, health status, consumption and expenditures of individual households.

These datasets was disaggregated according to rural-urban division, the six geo-

political divisions in Nigeria and according to gender to fully understand the

economic behavior of these constituent groups.

l
 CHAPTERFOUR
DATA ANALYSIS AND PRESENTATION OF THE RESULTS
4.1 Dimension of Poverty in Nigeria
Nigeria‘s national poverty profile (as well as those of the urban and rural areas) is

illustrated in Figure4.1for1980-2004(based on available data).The incidence of

poverty has generally been on the rise since 1980, with two significant differences

during1985-1992 and 1996-2004. Focusing on the most recent surveys (1996 and

2004), the national poverty incidence was 65.6 percent in 1996 and declined to

54.4 percent in 2004.Similarly, in 1996, the poverty depth(P1) and poverty severity

(P2) were 0.358 and0.207,but these decreased respectively to 0.225 and 0.122 in

2004.

Estimates of inequality also indicate that Nigeria has more unequal distribution of

income than Ethiopia, Madagascar, India, and Niger. Further analysis also suggests

that poverty in Nigeria is predominantly a rural phenomenon, with rural poverty

increasing from 28.3 percent in 1980 to 63.8 percent in 2004. However, the

proportion of the urban poor also rose from17.2 percent in1980 to 43.1 percent in

2004.Thus, within rural areas approximately 44.4 percent of households in 2004

could not meet their food expenditure requirements. Another 19.4 percent could

meet their food expenditure requirements, but not the minimum expenditure to

cover other basic needs. In the case of urban households, 26.7 percent were notable

to meet their required food expenditure requirements while 16.4 percent could

51
meet their food expenditure but no other non-food basic expenditure needs.

Table4.1: Percentage Distribution of the Population in Poverty

Years Non-Poor Moderately Poor Core Poor

1980 72.8 21.0 6.2

1985 53.7 34.2 12.1

1992 57.3 28.9 13.9

1996 34.4 36.3 29.3

2004 42.2 38.1 19.7

Source: NBS (2020)

52
4.2 Poverty condition in Nigeria

The poverty condition in Nigeria dropped from 65.6 percent in 1996 to 57.8

percent in2004 while non-poor increased from 34.4 percent in 1996 to 42.2 percent

in 2004. When this relative poverty measure was further disaggregated to two

levels of poverty, about20percent were core poor, 38.1percent moderately poor and

42.2 percent were non-poor. These equally showed that 10 percent had moved

from Core Poor to Moderate Poor while there was no remarkable change in the

moderate poor, which was 36.3 percent in 1996and 38.1 percent in

2004.Interestingly the Non-Poor increased from 34.4 percent in 1996 to 42.2

percent in 2004. The graph below shows the poverty condition in Nigeria

from1980-2004.

%Poverty Headcount

Fig.4.1:TrendsinPovertyLevels(1980-2004)
70

60

50

40

30

20

19801985 1992 1996 2004

10 Year

Source: NBS (2020)

53
On poverty and inequality, despite great natural wealth, Nigeria is poor and social

development limited. Thus, the plan for prosperity must address a bewildering

paradox: about two-thirds of the Nigerian people are poor, despite living in a

country with vast potential wealth. Although revenues from crude oil have been

increasing over the past decades, Nigerians have been falling deeper into poverty.

In 1980 an estimated 27percent of Nigerians lived in poverty. By 1999, about 70

percent of the population had income of less than $1 a day-and the figure has risen

since then. Poverty levels vary across the country, with the highest proportion of

poor people in the northwest and the lowest in the southeast.

4.3 Poverty in urban and rural areas of Nigeria

In 1996 urban non-poor was 41.8 percent as against 64.7percent in 2004. This

showed a remarkable improvement on the consumption patterns of the urban

dwellers. There was 3percent positive change in the moderate poor from 33.0

percent in 1996 to 29.8 percent in2004. The growing urban poverty noticed in 1996

has completely disappeared from25.2percent in 1996 to 5.6 percent in 2004.Most

importantly Rural Non-poor moved from 30.7 percent in 1996 to 35.9 percent in

2004.This also showed a positive change of5percent for the rural dwellers. The

moderately poor also changed negatively from 38.2 percent to 40.5 percent in 2004

while the core poor of 31.6 percent in 1996 dropped to 23.6 percent. This explains

54
the rise of moderately poor persons.

Table4.2: Poverty Headcount (in %) by Sector (Urban/Rural)

URBAN RURAL

Year Non Poor Mod Poor Core Poor Non-Poor Mod Poor Core Poor

1980 82.8 14.2 3.0 71.7 21.8 6.5

1985 62.2 30.3 7.5 48.6 36.6 14.8

1992 62.5 26.8 10.7 54.0 30.2 15.8

1996 41.8 33.0 25.2 30.7 38.2 31.6

2004 64.7 29.8 5.6 35.9 40.5 23.6

Source: NBS (2020)

The rural poverty which was 69.8 percent in 1996 dropped to 64.1 percent in 2004

while the urban poverty which was 58.2 percent in 1996 reduced drastically to 35.4

percent in 2004.The report noted that the steady decrease of the poor in the rural

areas is highly noticeable; the urban poverty seems to be disappearing fast with

35.4 percent being better than the percentage in poverty in 1985 which was

37.8percent. In 1996 all states were in Poverty except one state with 44.3 percent

incidence of poverty. Among those state noticeably in 2004, a total of 13 states had

moved out of poverty starting with Kwara 43.25 percent poor to Lagos 11.81

percent poor people. A graphical presentation of the state poverty showed that

55
while poverty incidence was declining in some states, it was actually increasing in

states like Jigawa, Kebbi and Yobe. This surveys represent a rich source on many

dimension of poverty at the household and individual level.

4.4 Growth Rate of Poverty in Nigeria

Table4.3 shows that the manufacturing sector with poverty growth of 155% from

the base incidence rate of 12.4% in 1980, clerical and related workers with growth

rate of191% from 10% in 1980 and other Category that experienced over 2000%

drop in standard of living within the short period 1980-1985 were the worst hit by

the crises of that characterized this period. While SAP was regarded by many as

sad chapter in Nigeria‘s economic development, the data show that actually

poverty fell relatively within this period in almost all the sectors.

Table4.3: Percentage Growth Rate of Poverty 1985–2004

Occupation of Household Head 1985 1992 1996 2004

Professional &Technical 105.8% 0.3% 45.1% -34.0%

Administration -43.8% - 50.2% 35.2%

11.9%

Clerical &r elated 191.0% 18.2% 74.7% -34.8%

Sales Workers 144.0% -8.5% 69.3% -22.0%

Service Industry 78.4% 0.5% 86.9% -39.8%

56
 Agricultural & Forestry 69.8% - 48.2% -5.6%

10.5%

Production &Transport 100.9% - 61.3% -35.4%

12.4%

Manufacturing & Processing 155.6% 4.7% 48.8% -10.5%

Others 2353.3 16.3% 43.0% -19.8%

Student & Apprentices 159.6% 3.2% 25.4% -20.6%

Total 70.2% -7.8% 53.6% -17.1%

The political upheaval that marked the period following the annulment of the June

1992 free elections resulted to deepening of poverty by 1996. All the sectors

except the administrative workers experienced improvement in standard of living

by 2004 following economic reforms that were instituted by the Obasanjo regime

which was elected in1999. These improvements in general welfare could be said to

result from improvements in the international oil prices, and the political stability

that led to positive economic growth which has since characterized the rest of the

first decade of the century.

57
4.5 Poverty decomposition in Nigeria

In order to ascertain the severity of poverty in Nigeria, we decomposed the poverty

into sectors taking poverty line to (3000).The FGT poverty gap index, which adds

up the extent to which individuals on average fall below the poverty line, and

expresses it as a percentage of the poverty line indicates that average poverty gap

is 0.9% and the same with the normalized poverty gap. The population share of

poverty going by the result of the decomposition by sub group shows that

population share of poverty concentrate at the rural areas with 0.75 indicating that

75 percent of the poor people in the country reside in the rural areascomparesto24

percent living in the urban areas.

The summary statistic for the subgroup shows that the mean gap between the urban

and the rural poor shows 2.31 for the rural poor compares to 2.28 of the urban

poor. The results equally indicate that that both the rural and urban poor equally

share the same poverty risk. The Generalized Entropy indices indicate that the Gini

index of income inequality was 0.29584. This goes in line with the previous

findings for instance, The World Bank (2003) found that in 1997, the Gini index of

income inequality for Nigeriawas0.506 while Oyekale et al., (2007) found that the

overall Gini index for Nigeria was 0.580. In sectorial sense, the study found

income inequality in rural areas (Gini 0.2948 )as compared to urban areas (Gini –

0.2988).the within group inequality result shows (0.13263)while between group in

58
equality indicates (0.00003) value.

4.6 Economic growth and poverty reduction in Nigeria

Economic reform in Nigeria was taken to a higher platform with the launching in

mid –2004 of National Economic Empowerment and Development Strategy

(NEEDS). The package recognizes the fact that for economic reform to be

successful it must be anchored on institutional reform, hence the latter forms a key

component of NEEDS. This marks a notable departure from earlier reform efforts.

According to Federal Government of Nigeria (FGN) report (2004) ―NEEDS has as

its focus wealth creation, employment generation, poverty reduction, corruption

eradication and general value re-orientation. Like earlier reform packages, the

strategy considers economic growth as crucial to poverty reduction.

4.7 Pro-poor growth in Nigeria

Recognizing that there is a degree of uncertainty about the location of a poverty

line, it can be important to look at impacts of aggregate economic growth over a

wide range of the distribution. A useful tool for this purpose is the―growth

incidence curve introduced by Ravallion and Chen (2003). This gives the rate of

growth over the relevant time period at each percentile of the distribution (ranked

by income or consumption per person).

Following the Ravallion and Chen (2003) and poverty growth curve based on the

frame work of Son (2004) measures of poverty growth incidence, the result of

59
poverty growth in Nigeria is therefore presented: In the figure below, The

horizontal line (in red) denotes the average overall growth rate (i.e.g ).It is

important to note that the result based on this framework does not rely on the

specification of any poverty line. Based on the chart if the growth rate at the

bottom percentile is greater than the overall growth

rate (i.e. g(p)>g forall p<100),growthwithintheperiod1996-2004ispro-poor.

However, the poverty growth curve shows that up until the poorest 80 percent of

the

Population growth is not pro-poor. This is g(p)< 80. wever

because gforp< Ho

Upward sloping nature of the curve implies that generally, there are improvements

as you move up the ladder but such improvements do not imply pro-poor growth

for the poorest segments of Nigeria.

60
Figure4.2: Poverty growth curve (1996-2004)

1
8
6

0 .2 .4 .6 .8 1
2

Percentile

TheFigure4.2showstha g(p)> forall p<100%. This implies that growth reduces

61
poverty across all percentiles but is accompanied with increasing inequality

(trickle-down growth) where the poor receive proportionally less benefits than the

non-poor from the process of growth. These show that even though national

poverty statistics indicate a decline of poverty headcount from about 66% (1996)

to 54% (2004), and an increment ingrowth over the same period, the dividends
4

from growth is disproportionately benefiting the rich than the poor. This works

through the inequality linkage.

Equally, the dual pro-poor curves which goes in line with works of Abdelkrim and

Duclos( 2007) is presented. Form the graph in figure below, the results is similar to

the poverty growth curves. In Figure 4.3, on an absolute level, the changes in the

quartiles at percentile p show that the overall growth rate is generally higher for

lower percentiles. We must note that the absolute pro-poor curve does not take into

account growth in mean expenditure.

A common empirical finding in the recent literature is that changes in inequality at

the country level have virtually zero correlation with rates of economic growth;

see, for

example, Ravallion and Chen(1997), Ravallion (2001), Dollar and Kraay (2002).

Amongst growing economies, inequality tends to fall about as often as it rises, i.e

growth tends to be distribution neutral on average.

62
Figure4.3: Absolute pro-poor growth curves (Dual Approach)
Absolutepropoorcurves
(Order:s=1|Dif.=(Q_2(p)-Q_1(p))/Q_2(p))
1
1
5

0 .2 .4 .6 .8 1
Percentiles(p)
Confidenceinterval(95%)
Estimateddifference

In Figure 4.3, this can be verified using the relative pro-poor curves. At all

percentiles below 70%, the curve lies below the horizontal line (zero).The curve is

only above the horizontal line at the top percentiles. These figures also show that

while growth has been positive between the periods (1996-2004), it is benefiting

the rich more than it does to the poor because of the increasing in equality in

incomes.

Figure4.4: Relative pro-poor growth curves (Dual approach)

Relativepropoorcurves
(Order:s=1|Dif.= Q_2(p)/Q_1(p)-mu_2/mu_1)
5
0

0 .2 .4 .6 .8 1
Percentiles(p)
Confidenceinterval(95%)Estimateddifference

63
In Figure 4.4, the relative pro-poor curve using the primal approach Abdelkrim and

Duclos, 2007 is presented. Here, the national poverty line (in real terms) was used.

Growth is pro-poor only when the curve lies below the horizontal line (zero).From

the chart for all poverty lines below N1600,the curve lies above the horizontal line

signifying that growth was not pro-poor. Pro-poor growth may be observed only

when poverty lines are raised. It is important to note that this does not take into

account the distribution of the variable of interest. Only mean expenditures and

poverty headcounts are relevant.

Figure4.5: Relative pro-poor growth curves(Primal approach)

Relativepropoorcurve
(Order:s=1|Dif.=P_2((m2/m1)z,a=s-1)-P_1(z,a=s-1))
.
.
.
.
0
-

0 1600 3200 4800 6400 8000

Povertyline(z)
Confidenceinterval(95%)Estimateddifference

While the curves presented are informative, they do not provide an index to assess

overall pro-poorness of growth in Nigeria.

In Tables 4.6 – 4.7 we present results showing selected pro-poor growth indices

64
using the FGT () (Foster et. al., 1984) class indices. In Table 46, poverty

headcount (= 0) was used as the measure of poverty. Table 4.7uses the poverty

intensity measure (= 1) while Table 4.8 uses the poverty severity measure (=

2).It is important to note that the Ravallion and Chen (2003) measure requires only

the headcount measure. This accounts for the same value of the index across all

tables.

65
Table 4.6: Selected pro-poor indices (=0)

Poverty line : 2645.00 Parameteralpha: 0.00

Pro-poor indices| Estimate STE LB UB

Growth rate (g)| 7.982741 0.346410 7.303790 8.661691

Ravallion Chen (2003) index| 0.926187 0.016550 0.893750 0.958624

Ravallion & Chen (2003) -g| -7.056554 0.342562 -7.727962 -6.385145

+ Kakwani &

Pernia (2000) index| 0.778632 0.010212 0.758618 0.798647

PEGR index| 6.215619 0.283503 5.659963 6.771275

PEGR-g| -1.767122 0.110670 -1.984030 -1.550213

From the tables above, the overall growth rate is7.98% (with standard error of

0.35%).To assess the extent of pro-poorness, this is compared with the respective

indices (except for the Kakwani and Pernia index).The Ravallion & Chen (2003)

66
index of 0.93 implies that growth over the period 1996 – 2004 is not pro-poor.

Specifically, this can be understood as a trickle-down growth because (0.93 <

7.98).The Kakwani et. al. (2004) measure uses the Poverty Equivalent Growth

Rate (PEGR) (*).This is the growth rate that would produce the same level of

poverty reduction as the actual growth rate would, provided that inequality

reductions accompany the growth process (Kakwaniet.al.2004).If*> g(i.e.the

overall growth rate), then we have a pro-poor growth. If (0<*<1), we have a

trickle down growth; and if (*<0), we have an immiserizing growth.

From Table4.6, the PEGR is less than the actual growth rate (i.e. 6.22% <

7.98%).This implies that we observe a trickle-down growth which is not

necessarily pro-poor in the strict sense. This is also consistent with the results of

the Son (2004) growth poverty curve and that obtained using the Ravallion and

Chen approach. For the Kakwani andPernia index (), if > 1, it implies that the

growth process is pro-poor; if 0 < < 1 the growth process is described as a

trickle-down and if < 1 the growth process is described as immiserizing. In this

case, we have that 0 < < 1 which again confirms a trickle down growth process

between the period of1996– 2004.

67
Table4.7: Selected pro-poor indices (=1)

Poverty line : 2645.00Parameteralpha: 1.00

Pro-poor indices| Estimate STE LB UB

Growth rate (g)| 7.982741 0.346410 7.303790

8.661691

Ravallion & Chen (2003) index|0.016550 0.893750 0.958624

0.926187

Ravallion & Chen (2003) -g| -7.056554 0.342562 -7.727962 -6.385145

+ Kakwani &

Pernia (2000) index|0.754256 0.007285 0.739977 0.768535

PEGR index| 6.021033 0.282218 5.467895 6.574170

PEGR-g| -1.961708 0.089574 -2.137271 -1.786146

Even using different poverty measures as shown in Tables 4.7 and 4.8, the growth

68
process is not pro-poor. All the results shown are statistically significant at 5%

level

Table4.8: Selected pro-poor indices (=2) Poverty line : 2645.00

Parameteralpha: 2.00

Pro-poor indices| Estimate STE LB UB

Growth rate (g)| 7.982741 0.346410 7.303790

8.661691

Ravallion & Chen(2003) index|0.016550 0.893750 0.958624

0.926187

Ravallion & Chen (2003) -g| -7.056554 0.342562 -7.727962 -6.385145

+ Kakwani &

Pernia (2000) index|0.770739 0.007849 0.755355 0.786123

PEGR index| 6.152610 0.290158 5.583911 6.721309

PEGR-g| -1.830130 0.086957 -2.000564 -1.659697

A comparison of all the methods used show that there is some level of concordance

69
in predicting the nature of growth in Nigeria between 1996 and 2004. Because

these Method use different evaluative frameworks, we cannot compare the

magnitudes of their indices. However, still illuminating, even though there was

remarkable growth experience over the period in Nigeria, it did not translate into a

reduction in inequality. Though the growth process in Nigeria was able to reduce

the magnitude of poverty to some extent, this did not translate to improvements in

inequality.

70
 CHAPTERFIVE

SUMMARY, CONCLUSION AND RECOMMENDATIONS

5.1 Summary of findings

The concept of poverty has evolved in the history of economic thoughts,

witnessing different stages of transition since the 18th century. The post-colonial

period has been characterized by a deliberate transfer from the North to the South

of the anti- poverty polices development in Europe during the nineteenth and

twentieth centuries. Poverty has been traditionally understood to mean a lack of

access to resources, productive assets and income resulting in a state of material

deprivation. Poverty reduction has received increased focus in development debate

in the past two decades. Progress on poverty reduction has become a major

measure of success of development policy. The Nigerian economy naturally

endowed with immense wealth, still found a substantial portion of its population

still in poverty. Nigeria‘sbasicsocialindicatorsnowplaceherasoneofthe25 poorest

countries in the world. The economy has recorded a rising growth in its GDP

especially over the last decades but has not translated into accelerated employment

and reduction in poverty among its citizens.

Nigeria implemented Structural Adjustment Programme (SAP) policies in the1986,

which continued in varying degrees till the late 1990s. The new democratic

71
government in 1999 introduced further series of reforms, culminating in the

National Economic Empowerment and Development Strategy (NEEDS) launched

in mid-2004. Following the reforms, the real growth rate became positive from

1988, turning from an average of minus 1.7 per cent in 1980/86 to 4.7 percent in

1986/92. The strong growth performance continued in the 1990s and into the

2000s, rising to 6.6 percent in 2002/2004 and 6.24 percent in 2004/2006.

5.2 Conclusion

In conclusion, the national poverty incidence result shows 65.6 percent in 1996 and

declined to54.4 percent in 2004.The poverty depth (P1) and poverty severity (P2)

were 0.358 and 0.207 in 1996 but these decreased respectively to 0.225 and 0.122

in 2004. Estimates of inequality also indicate that Nigeria has more unequal

distribution of income than Ethiopia, Madagascar, India, and Niger.

Further analysis also suggests that poverty in Nigeria is predominantly a rural

phenomenon, with rural poverty increasing from 28.3percent in1980to63.8 percent

in 2004.The proportion of the urban poor also rose from 17.2percent

in1980to43.1percent in2004.The result shows that rural areas approximately 44.4

percent of households in 2004 could not meet their food expenditure requirements,

19.4 percent could meet their food expenditure requirements, but not the minimum

expenditure to cover other basic needs. For the urban households, 26.7 percent

were not able to meet their required food expenditure requirements while 16.4

72
percent could meet their food expenditure but no other non-food basic expenditure

needs.

Sectorial decomposition of poverty in Nigeria the FGT poverty gap index indicates

that average poverty gap is 0.9%. The decomposition by subgroup shows that

population share of poverty concentrate at the rural areas with 0.75 indicating that

75 percent of the poor people in the country reside in the rural areas compares to

24 percent living in the urban areas. The summary statistic for the subgroup shows

that the mean gap between the urban and the rural poor shows 2.31for the rural

poor compared to 2.28 of the urban poor. The results equally indicate that that both

the rural and urban poor equally share the same poverty risk. The Generalized

Entropy indices indicate that the Gini index of income inequality was 0.29584 for

the year 2004.

The poverty growth curve shows that up until the poorest 80 per cent of the

population, grow this not pro-poor. The dual pro-poor curve shows that the

changes in the quartiles at percentile p show that the overall growth rate is

generally higher for lower percentiles. The relative pro-poor curve shows that

while growth has been positive between the periods (1996-2004), it is benefiting

the rich more than it does to the poor because of the increasing inequality in

73
incomes. The pro-poor growth result obtained indicates that the overall growth rate

is 7.98% (with standard error of 0.35%).The PEGR measure shows a trickle-down

growth which is not necessarily pro-poor. The overall pro-poor growth result

indicate that though the growth process in Nigeria was able to reduce the

magnitude of poverty to some extent, this did not translate to improvements in

inequality

5.3 Policy Recommendations

Based on the findings, the following recommendations are therefore made:

(i) There should be improvement in the quality of government spending in

Nigeria.Fiscalpolicyexpansionshouldtendtowardsincreasingthecomponentofgovern

mentexpenditure that will lead to a sustained growth and also an improvement in

the standard of living of the citizens

(ii) The Federal government should support value creation in critical sectors of

the Nigerian economy which employs large population like agriculture and

industry in order to make growth pro-poor

(iii) In order to be able to reap the benefits of a positive external shock-there is a

need to increase the level of competitiveness and the productive capacity of the

country

74
(iv) Investment in basic infrastructures such as power and roads are very crucial

at this stage of the Nigerian economy

(v) A policy that should have direct impact on the rural poor should be adopted

by the Federal government in tackling poverty issues in Nigeria.

75
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