Structural Transformation and Poverty in Nigeria

Although Nigeria is the largest country in Africa, it is plagued by increasing poverty, rising unemployment, and inflation, among other macroeconomic issues. In tackling some of these economic issues, structural transformation becomes important. This study, therefore, examines sectoral efficiency as a means of reducing poverty in Nigeria. The value-added share as a percentage of GDP from 1986 to 2023 was analyzed to achieve the objective of this paper. The Autoregressive Distributed Lag (ARDL) estimation technique is used to analyze the dynamic relationship between variables to examine the short-run and long-run relationships. Short-run results show that the agricultural sector reduces poverty, but its effectiveness diminishes over time. However, the manufacturing and service sectors exhibit a positive and significant relationship with poverty in the present period. The long-run ARDL estimates reveal that manufacturing sector output, service sector output and interest rate have a positive and significant relationship with poverty in Nigeria. This indicates that agriculture, despite being the backbone of the Nigerian economy, has experienced a declining share of GDP due to structural transformation. This shift reflects the economy’s movement away from agriculture toward industrialization and services. However, the insignificance of agriculture in poverty reduction and the positive effect of manufacturing and services on poverty highlight an ongoing but incomplete structural transformation for Nigeria. The study recommends an acceleration of industrialization and expansion of high-productivity services to address poverty in Nigeria.