The Impact of Poverty and Unemployment on Economic Growth in Nigeria (1990–2025)

Abstract

This study examines the impact of poverty and unemployment on economic growth in Nigeria utilizing annual time-series data spanning the period 1990–2025. The research employed a robust econometric framework, including the Phillips-Perron (PP) unit root test, Johansen Cointegration test, and the Vector Error Correction Model (VECM) to analyze both long-run equilibrium and short-run dynamic relationships. Unit root testing confirmed that all variables-Gross Domestic Product (GDP), Poverty (POV), Unemployment (UNEMP), Interest Rate (INTR), Net Exports (NETEXP), and Foreign Direct Investment (FDI)-were integrated of order one, I(1). The Johansen Cointegration test identified at least three stable long-run relationships among the variables. The VECM results indicated a statistically significant error correction term (CointEq1 = -0.099, t = -2.05), suggesting a relatively slow adjustment speed of 9.9% toward long-run equilibrium following a shock. Notably, the long-run analysis revealed a positive relationship between poverty and GDP, suggesting that economic growth in Nigeria has historically been non-inclusive. Conversely, FDI demonstrated a significant negative long-run impact on GDP (t = -5.63), while unemployment showed a negligible long-run effect. The study concludes that Nigeria's economic growth has not effectively translated into poverty reduction or employment generation. It is recommended that policymakers shift focus from aggregate growth figures toward structural reforms that prioritize human capital development and inclusive industrialization to decouple growth from rising poverty levels.