Financial Inflows and Poverty Rate in Nigeria

Abstract

Povertylevel has gained massive attention as an important societal concern particularly since its emergence nearly forty years ago. Universally, the role of these financial inflows is recognized as relevant resources to finance development and reduce poverty level. However, Nigeria remains and offers a compelling case study within the context of developing economies, particularly regarding sustainable development action points. Despite being the most populous and one of Africa’s largest economies, Nigeria seems to be lagging behind in the actualization of the targets set for achieving the United Nations’ Sustainable Development Goals (SDGs) of poverty reduction as a result of financial constraints. Therefore, this study examined the effect of financial inflows on poverty rate in Nigeria between 1990 to 2024. The study employed Fully Modified Ordinary Least Square, with inference at 5% significance level. The findings of the study reveal that in the long run, foreign portfolio investment significantly reduces poverty, 2.37% decline in poverty, external debt significantly increases poverty. Other inflows, including foreign aid, foreign direct investment, and diaspora remittances, show negative and positive but statistically insignificant long-run effects respectively. The study concludes that financial inflows exert differential and context-specific impacts on Nigeria’s poverty rate. Based on the findings of this study, policies should focus on attracting productive investments that create employment and improve poverty reduction. Simultaneously, debt management strategies must ensure that borrowing is aligned with poverty-reducing projects, avoiding excessive or poorly utilized external debt that could intensify socio-economic vulnerabilities.