Exploring the interaction of trade openness, income inequality, and poverty in Nigeria

Abstract

The literature on the nexus between trade openness, income inequality and poverty appears conspicuously and of diverse outcomes. Perhaps, the mixed findings may be attributed to the methodology and economic structure of the country in view. The current study examines the trade openness on income inequality and poverty in Nigeria between 1981 and 2019 using Autoregressive Distributed Lags (ARDL) methodology. Our findings show that trade openness had different effects on inequality and poverty in Nigeria in the short and long run. While its relationship with inequality is a short-run phenomenon, it had a long-run relationship with poverty. Overall, trade openness had a declining effect on inequality and poverty. In the former, its impact was not statistically significant. However, the gains of trade openness on inequality and poverty were reversed when inequality influenced trade openness. In essence, with the influence of inequality, trade openness had an increasing effect on poverty. As a result, this study makes several recommendations to policymakers. To begin, a policy framework must be established to ensure that Nigerian trade is integrated with the rest of the world. Evidence from this study has suggested that policies such as restricting trade through border closures must not feature as a policy option as long as one of the goals of the economy is poverty reduction and reduction in inequality.

Modelling the nexus between income inequality and shadow economy in Nigeria

“…However, the growth of the shadow economy is often described as a limiting agent of economic growth (Esaku, 2021a), exacerbating income inequality (Esaku, 2021b), and encouraging tax evasion (Buehn and Schneider, 2012). In Nigeria, income inequality and extreme poverty have been on the rise for several decades, and has compelled the weakening of domestic growth and persistent poverty (Maku et al, 2021). Surprisingly, this outlook provides a picture of Nigeria's current inequality situation as well as a consideration of whether opportunities for the active population exist solely in the informal or shadow economy.…”

Causal analysis of trade openness, government expenditures and economic growth in Nigeria (1980-2020): Recalling economic policy corrective actions

“…The government increased spending to reduce apparent unemployment. Nigeria needs to spend more to boost trade openness and economic growth, which is mainly dependent on government expenditure to in uence either education or a rise in school attainment that can de ne skills acquisition as a mechanism to improve productivity (Awogbenle and Iwuamadi, 2010;Kizito, 2013;Maku et al, 2021;Sule, 2020;Wilkinson, 1998).…”