Assessing the Impact of Income Inequality on Poverty Level in Nigeria Using Auto Regressive Distributed Lag Model

Abstract

There is widespread concern about global inequality and economic growth that the economic crisis has only widened the gap between the rich and the poor. Poverty and income inequality are two interrelated and mutually reinforcing developmental issues in Africa. This research employed the Auto Regressive Distributed Lag (ARDL) model to evaluate the influence of income inequality on the level of poverty in Nigeria. The secondary data from CBN (2011) and WDI (2022) was used in this study. The study's findings indicated a sustained positive correlation between poverty levels and the Gini coefficient of income inequality in Nigeria, derived from the relationship of each income determinant with the Gini coefficient of income disparity in the Nigerian economy. Therefore, it is advisable to improve the equitable distribution of resources, which will effectively diminish economic inequality and poverty in Nigeria. The government ought to focus on formulating and executing more pragmatic employment initiatives in Nigeria. The empirical findings of this study indicate that reducing income inequality in Nigeria by an increase in the employment rate has been inadequate. A pragmatic approach to employment would enable individuals to utilise their finances to accumulate wealth rather than merely subsist, hence enhancing the degree of the income distribution.