Conference Paper

Dynamic Effects of Macroeconomic Policy Shocks on Poverty in Nigeria (2000-2024): Evidence from Developing Country

This study examines the dynamic relationship between macroeconomic variables and poverty in Nigeria, addressing the persistent disconnect between macroeconomic stabilization policies and welfare outcomes. Despite sustained reforms, poverty remains structurally high, suggesting weak policy transmission mechanisms. Specifically, the study investigates the effects of inflation, unemployment, interest rate, and balance of payments on poverty dynamics from 2000–2024. Annual time-series data were sourced from the World Bank, International Monetary Fund, Central Bank of Nigeria, and National Bureau of Statistics. The study employs a Vector Autoregression (VAR) and Vector Error Correction Model (VECM) framework. Unit root tests (ADF and Phillips–Perron) confirm that all variables are integrated of order one, I(1), while the Johansen cointegration test reveals long-run relationships (Trace = 157.09; Max-Eigen = 66.61, p < 0.05). Lag selection criteria identify lag length two as optimal. The VAR results indicate strong model fit (R² = 0.966 for poverty), confirming dynamic interdependence among variables. Empirical findings show that unemployment has a positive and statistically significant long-run effect on poverty (t = 6.448), while inflation exhibits a negative but significant relationship (t = −4.551). Balance of payments is positive and significant (t = 4.632), whereas interest rate is insignificant. The error correction term (−0.0825) indicates slow adjustment toward equilibrium. Diagnostic tests confirm model robustness (no serial correlation: p = 0.1654; normality: p = 0.9336; homoskedasticity: p = 0.3452). The study highlights that poverty in Nigeria is driven by structural factors, particularly unemployment, and requires coordinated, employment-centered macroeconomic policies. Key words: Inflation, Macroeconomic Policy, Nigeria, Poverty Dynamics, Unemployment