Title:
The Nexus between Foreign Aid, Poverty Level and Economic Growth: Evidence from Nigeria

Authors:
ILESANMI, Alfred Olagoke, Nigeria

Abstract:

The bones of contention among some scholars were that Official Development Assistance ODA was counterproductive in recipient countries and that it used to be donated to reduce poverty level but now being donated to improve economic growth as well. To determine impacts of ODA on both economic growth and poverty reduction we analyzed relevant data on Nigerian economy using GDP as dependent variable and ODA, Gross Domestic Product per Capita (GDPPC) as explanatory variables in addition to some control variables for the period 1980 -2020. The best model that could analyze these three objectives together at a time was the vector autoregressive (VAR) model from which we discovered that: (i) 1% increase in ODA brought about 8% increase in GDP over time, meaning that ODA was not counterproductive in Nigeria, (ii) ODA also improved economic growth of Nigeria by 8% (iii) ODA also reduced poverty by about 0.91% for every 1% increase in ODA received during the period. Since the contribution of ODA to GDP was so marginal but positive we recommended that government should continue to receive more ODA from more donors but utilize it for more productive economic activities like building more industries to generate employment for graduates roaming about the streets to reduce the level of unemployment and reduce more poverty level. Investing ODA in mechanized agriculture would also go a long way to improve the economy and reduce more poverty from the society. 

DOI: http://dx.doi.org/10.51505/ijebmr.2022.6607