Determinants of Poverty Level in Nigeria

Abstract

This study uses annual data between 1990 and 2010, and employs Dynamic Ordinary Least Square (DOLS) method to examine what determines poverty level in Nigeria. Unlike many studies, we measure poverty with poverty index generated from combination of per worker agricultural value added, real per capita income and consumption per capita using principal component analysis and common measurement of poverty (i.e. per capita real income). We first remove the trend component of our dependent variables (poverty index), using Butterworth filter and then regressed them on the important variables of interest. The findings show negative relationship between political right in levels and poverty, but positive relationship was found when political right was differenced. This result was not statistically significant. Political terror was found to reduce poverty with statistically significant result in levels when per capita real income was used for poverty, and became positively related with poverty when differenced. The result was statistically significant. We found that civil liberty was positively related to poverty, but the result was not statistically significant. Democracy was noted for reducing poverty with statistically significant result, while the increase in population and poverty were positively related with statistically significant result.