Poverty, Income Inequality and Economic Growth in Nigeria (1981-2019)

This study empirically examined the relationship between poverty, income inequality and economic growth in Nigeria. The study used time series data from National Bureau of Statistics (NBS) and Central Bank of Nigeria (CBN) Statistical Bulletin between the periods from 1981 to 2019. The study employed the use of Augmented Dickey Fuller test, Co integration test and Error Correction technique. The unit root test results indicated that all the variables were stationary at first difference and co-integration test confirmed a long run relationship among the variables. The error correction model shows that about 96 percent of the discrepancy between the actual and the equilibrium value of economic growth is corrected or eliminated each year. The coefficient of determination (R 2 ) is 0.68 which shows that about 68 percent variations in the economic growth were explained by the independent variables. Furthermore, the Breusch-Godfrey Serial Correlation LM Test shows that the probability of the chi-square (2) is 0.2775 and this is greater than 0.05 at 5% significance level. This therefore confirms the absence of serial correlation. Also, the Breusch-Pagan-Godfrey Heteroscadaticity test indicates that the probability of chi-square (5) is 0.1242 and this is greater than 0.05 at 5% significant level. This also confirms the absence of heteroscedasticity in the model. From the study, the findings revealed that income inequality has a negative relationship with economic growth in the country while poverty was found to be positively related to economic growth. Similarly, the findings also revealed that poverty and income inequality has an insignificant effect on economic growth in Nigeria. Based on the findings, it can be concluded that poverty and income inequality has not significant relationship with economic growth in Nigeria. Thus, the study concludes that there is need for government of the country to come up with an all-inclusive policy and programme that will be targeted to the poor and give them ample opportunities to improve their welfare. (Fawaz et al, 2014).This study however seeks to examine the relationship between poverty, income inequality and economic growth in Nigeria.


Introduction
The foremost macroeconomic objective of governments in almost all countries of the world is the actualization of rapid economic growth (Iyoha 2002). The actualization of economic growth leads to higher and ever-increasing economic prosperity. This increasing economic prosperity is empirically linked to greater overall levels of societal progress and improvement. Conversely, without economic growth, economies of nations tend to stagnate thereby deficiency in the provision of the social and economic well-being of their citizens. Economic failure historically causes a loss of trust and social upheaval, frequent and ugly triggers of social conflicts (Loto, 2011).
Poverty is a global issue affecting both developed and developing economies of the world.
Generally, it has a challenging effect on developing countries, the sub-Saharan Africa in particular (Addae-Korankye 2014). Poverty is multidimensional in nature and can be evident in different forms such as deficiency of material income, adequate to guarantee good living standard; hunger and under-nutrition; illness; limited education and health services; persistent rise in mortality and morbidity due to sickness; homelessness and insufficient housing; insecure environments and social exclusion and discrimination (Ogbeide, Nwamaka & Agu, 2015).
Globally, statistics has shown that more than 800 million persons are still living on less than $1.25 a day (UNDP 2018). Nigeria is endowed with rich human and natural resources. Given these wealth in economic potentials, it is particularly disturbing and ironical that Nigeria is still rated as one of the poorest countries of the world. According to Statistics from United Nations Development Programme (2020) report reveals that Nigeria ranked number 161 out of 189 countries in Human development. The report puts Nigeria's Human Development Index at 0.539 which is below the prescribed level. Furthermore, statistics also show that as at 2014, the poverty and unemployment rate in Nigeria were 7.2% and 7.8% respectively. As at 2020, the poverty and unemployment rate has increased to 40.1% and 33.3% respectively (National Bureau of Statistics, 2020).
The concept of inequality is fundamental for achieving a sustainable economic growth and development. Inequality is defined as the difference in the standard of living across a population (Gallo, 2002). There are different types of inequality such as: gender, health, wealth and income. However, this study focused on income inequality. Income inequality is defined as the disparity in income between rich and poor individuals in a society. According to Clark (2015), over 70 percent of the population in developing countries lives in highly unequal societies.

Statistics has shown that the issue of inequality in Nigeria peaked between 1985 and 2004
where the country's Gini coefficient increased from 38.0 to 40.1. Also, in 2010, the coefficient has risen further to 43.0. The Gini coefficient declined to 35.0 As at 2020 (National Bureau of Statistics, 2020).
According to Kolawole and Omobitan (2015), poverty and inequality in Nigeria is a paradox. Prior researches which investigates the link between poverty, income inequality and economic development focuses mostly in developed economies (Knowles, 2005;Nahum, 2005;Davis, 2007;Barro, 2008;Fosu, 2009;Clement;Cingano, 2014). There is however very few significant study in this area for developing countries like Nigeria. In the Nigerian context, most of the studies (such as Awoyemi, 2005;Oguntuase, 2007;Ogwumike & Afangidel, 2008;Oyekale, Adeoti, & Ogunnupe, 2008) focused on either the relationship between inequality and economic growth or poverty and economic growth or between inequality and poverty. It is against this background that this study intends to fill this gap in literature. Hence, this study will examine holistically the effect of income inequality and poverty on economic development in Nigeria.
The remaining of this paper is organized as follows; Section two review theoretical and empirical literatures. The third section focuses on methodology. Section four looks at the presentation and analysis of results while the final section provides conclusion and recommendations.

Literature Review
The theoretical basis of the study is based on Kuznets hypothesis. The work of Simon Smith Kuznets (1955) is the most popular and influential framework used to explain the relationship between poverty, income inequality and economic growth. Kuznets (1955) propose that at low levels of per capita income, inequality increases with rising per capita income and eventually reduces in the later stage of development. This could be attributed to the fact that most developing countries are characterized by a traditional agricultural economy with low productivity potential and as it transforms through the process of economic growth. Therefore the relationship between economic growth and income inequality can be represented by an inverted 'U' pattern referred to as the Kuznets inverted 'U' hypothesis. Basically, the hypothesis suggests that developing countries would experience a more favorable distribution of income in the process of development though it may be less favorable in the initial stages. The inverted 'U' hypothesis has motivated many studies on the relationship between income inequality, poverty and economic growth.
According to Aghion and Bolton (1997) Kuznets curve resulted from credit a market imperfection which causes different behavior among the rich and the poor. This is because high income earners have greater access to financial markets (e.g. access to loans and lending services), unlike low income earners who are less likely to gain financial assistance. During the early stages of economic growth, the rich get richer and the poor remain poor; however during later stages of growth, the inequality gap becomes smaller.
Since, the pioneering of the work of Kuznets (1955), several schools of thought have emerged within different ideological perspectives on the nature of relationship between income inequality, poverty and economic growth. Some studies such as Galor and Zeira (1993), Persson and Tabelini (1994) and Alesina and Rodrik (1994) argued that income inequality created economic growth, while others argued that economic expansion would lead to increased income, which ultimately would reduce poverty and income inequality (Aghion, Carol & Garrcia-Penalosa, 1999). On the other hand, Ravallion (1997) suggested that economic growth could even result in higher income disparity and increase poverty profile. The variation in results is dependent on several factors, such as: lack of accurate data, time span and sensitivity to various econometric approaches (Fawaz et al, 2014).This study however seeks to examine the relationship between poverty, income inequality and economic growth in Nigeria.

Poverty and Economic Growth
The relationship between poverty and economic growth has been investigated by various studies. Empirical evidences show that countries that have reduced poverty are the ones that have grown the fastest. Poverty, on the other hand, has grown fastest in countries that have periods. Growth since the early 1990s has been substantial, mainly because of the various structural reforms implemented by most developing economies since the early 1980s. He explained further that while growth is a major factor behind changes in poverty levels, income inequality nevertheless is very important because of its effects on the poverty pattern in most countries. He therefore proposed that special attention should be paid to reducing income inequality particularly in countries with highly unfavorable income distribution. Ijaiya, Ijaiya, Bello and Ajayi (2011) examine 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 be implemented.

Income Inequality and Economic Growth
Several studies have examined the relationship between income inequality and economic growth. Akpolih and Farayibi (2012) conducted a study on the magnitude of inequality as a barrier to economic growth in Nigeria between the periods 1981 to 2009 by employing the use of regression analysis. Their results show that inequality decreases economic growth. They claimed that inequality leads to slower growth through the level of savings and total investment in the economy. Government inefficiency and corruption also had a role to play. Similarly, another study conducted by Awe and Rufus (2012), found out that the Gini coefficient for Nigeria was very high, suggesting high levels of inequality. This was primarily attributed to the level of GDP, education and government expenditure. Generally, studies such as Galor and Zeira (1993); Perotti (1993); Alesina and Rodrik (1994); Persson and Tabellini (1994); Birdsall, Ross and Sabot (1995); Clarke (1995); Alesina and Perotti (1996) (2000); and Nahum (2005) are of the opinion that income inequality has a positive impact to economic growth. According to Li and Zou (1998), income inequality may theoretically lead to higher economic growth if public consumption enters the utility function. However, according to a study conducted by Barro (2000), the effect of income inequality on economic growth may differ in developed and developing economies.
Aigbokhan (2008) found poverty elasticity of growth to be high in Nigeria. The author argued that economic growth in Nigeria propelled poverty, probably due to its non-inclusive nature. The empirical links between the variables were, however, not clearly specified in his models. Fosu

Model Specification
The specification of an appropriate econometric model borders on the prevailing economic circumstance(s) and the availability of economic data relating to the variable(s) being examined (Koutusoyiannis, 1997). Therefore, following the works of Hoi Quoc (2010) that stated that growth is a function of poverty and income inequality. This can be expressed mathematically as; However, equation (2) above can be modified as; The econometric form of the model above is stated as;

Data and Sources
The study employed the use of annual time series secondary data sourced from the National

Bureau of Statistics (NBS) and Central Bank of Nigeria (CBN) statistical bulletin spanning
between the periods 1981 to 2019.'

Techniques of Analysis
The study adopts an Ordinary Least Square (OLS) as a statistical tool of analysis. In other to avoid difficulties that may arise while performing regression on time series data with clearly nonstationary series thus leading to spurious regression results, this study however adopted Augmented Dickey Fuller (ADF) test for our unit root in order to attain stationary. The study also employed the use of Johansen co-integration test so as to ascertain the long run relationship between variables employed for this study. Finally, Error Correction Model (ECM) technique is employed to correct any form of dis-equilibrium in the short run. These results show that all the variables except RGDP and GCE are not normally distributed    and D(GCE) were found to be stationary at first differenced. Hence, having tested for the stationarity of the variables, we proceed to test for the long run relationships of the variables which give us the co integration result in table 4 below;        (2) is 0.2775 and this is greater than 0.05 at 5% significance level and therefore the null hypothesis is accepted. This implies and therefore confirms the absence of serial correlation

Hypotheses
There are two hypotheses governing the CUSUM and they are expressed below.
H 0 : parameters are stable H 1 : parameters are not stable.

Decision Rule
If the blue/dotted line is found between/within the two parallel red lines, we accept the null hypothesis (stable) and reject the alternative hypothesis (not stable). But if the blue line is found across/outside the red lines, we accept the alternative hypothesis (not stable) and reject the null hypothesis (stable).
From the figure 1 above, the CUSUM remained within the 5 percent critical lines throughout the whole period thus, signifying parameter stability during the course of assessment.

Conclusion
This study empirically examined the relationship between poverty, income inequality and economic growth in Nigeria using data spanning between the periods 1981 to 2019, by employing the use of Augmented Dickey Fuller test, Co integration test and Error Correction technique. From the study, the findings revealed that income inequality has a negative relationship with economic growth in the country while poverty was found to be positively related to economic growth. Similarly, the findings also revealed that poverty and income inequality has an insignificant effect on economic growth in Nigeria. Based on the findings, it can be concluded that poverty and income inequality has not significant relationship with economic growth in Nigeria. Thus, the study concludes that there is need for government of the country to come up with an all-inclusive policy and programme that will be targeted at the poor and give them ample opportunities to improve their welfare. Since, most income inequality in the country tends to be obvious and visible in the rural area and places with low social and economic welfare, it therefore means that there is need for the government to provide basic infrastructure such as good road, schools, health care facilities, availability of good water supply and electricity to people in those places. If properly done, will ultimately result to decline in poverty and income inequality in the country.

Ethics approval and consent to participate
Not applicable

Consent for Publication
Not applicable

Availability of data and materials
The data for this study were sourced from the database of National Bureau of Statistics (NBS) and Central Bank of Nigeria (CBN) Statistical Bulletin (https:/www.cbn.gov.ng).

Competing interests
The author declares that there are no competing interests associated with this manuscript.

Funding
I hereby declare that there was no funding received for this manuscript.

Author's contributions
The author was the overall contributor to the development of all the sections in this manuscript.