Reassessing the Efficacy of Foreign Aid and Grants in Poverty Reduction in Nigeria

Abstract

This study re-examines the efficacy of foreign aid and grants on poverty reduction in Nigeria using time series data covering the period of 1999 to 2017. To perform the inquiry, the paper focus on disaggregated data for the analysis of foreign aid and grants, that is, technical cooperation grants (TCG), official development assistance (ODA) and other grants. Grounded on the Great Big Push theoretical framework, the study tested the marginal effect of TCG, ODA and other grants on poverty incidence in Nigeria using the Autoregressive Distributed Lag (ARDL) bounds testing approach. The empirical findings show that TCG and ODA have positive but insignificant impact on national poverty incidence in the short-term horizon; however, in the long-term, the effect of TCG and ODA on poverty incidence is negative. This finding suggests that the plausibility of poverty reduction policy based on external aid and grants is contestable. This affirms the argument that externally nominated solutions in form of foreign aid and grants do not connect with locally defined problems in poverty reduction. Contribution/ Originality:This study is one of very few studies to explore the influence of disaggregated data of foreign aid and grants on poverty incidence in dimensions such as technical corporation grants, official development assistance, and other grants using the ARDL model of Nigeria from 1999 to 2017.

Sectoral Allocation of Foreign Aids and Poverty Alleviation in Nigeria, 2010-2020

“…The framework of analysis adopted in this study is the Big Push Theory which argues that to escape the poverty trap and take-off into national development requires a significant inflow of aggregate aid (such as grants and concessional loans) in social and productive sectors which will result in growth across all sectors of poor societies (Shitile & Sule, 2019). The major proponent of this theory was Paul Narcyz Rosenstein-Rodan.…”

The Effect of Foreign aid and Vocational Training on Poverty Reduction Strategy: An Empirical Evidence from Chad Republic

“…Their analysis revealed that social aid such as education, health and water and sanitation spending significantly and directly benefits the poorest in the society and economic aid on the other hand, like transportation, energy and communication and financial infrastructure spending increases the income of the poor through growth (Hirano and Otsubo, 2014). Notwithstanding, many scholars concluded that foreign aid or official development assistance (ODA) has direct or indirect influence on reducing Proceedings of the International Conference on Industrial Engineering and Operations Management Istanbul, Turkey, March 7-10, 2022 poverty; others state that it does not affect poverty reduction strategy for example, Briggs and Briggs (2015); Appiahkonadu et al (2016); Ugwuanyi, Uche Boniface, Ezeaku, Hillary Chijindu (2017); Chikwede, (2017) ;Muftau, (2018); Pedro Gil, (2018) and Shitile and Abubakar (2019).…”