Impact of the Agricultural Sector on Rural Household Poverty Reduction in Nigeria

Abstract

The European Union described poverty as exclusion from social, material and cultural activities, while the United Nations added that poverty implies lack of participation in decision making, social and cultural discrimination. In Nigeria, poverty is a notorious phenomenon which worsens on a daily basis and affects the welfare of most households negatively. The study examined the impact of the agricultural sector on rural household poverty reduction in Nigeria between 1981 to 2023. Time series data were collected from the Central Bank of Nigeria and the National Bureau of Statistics Bulletins. The Household Consumption Expenditure (LHCEX), which was employed to measure poverty, was specified as a function of Government Agricultural Expenditure (GAEX), Agricultural output (LAGOP), Government Agricultural Credit (LGACR), Green Alternative policy (AGPY) and Inflation Rate (INF). The estimation techniques are the Vector Error Correction Model (VECM) and the Granger causality test. The results show that LGAEX and AGPY had a positive but insignificant impact on LHCEX, LAGOP and INF had a negative but significant impact on LHCEX, while LGACR had a positive and significant impact on LHCEX.A unidirectional causality ran from LHCEX and GAEX to LAGOP, while a unidirectional causality ran from LAGOP to INF. The study concludes that all the variables have a strong relationship with poverty reduction and recommends increased budgetary allocation to the agricultural sector, effective monitoring of the disbursement of the funds, easy access to credit and effective strategising of agricultural policy to benefit more farmers so as to enable an increase in agricultural output and to achieve poverty reduction in Nigeria.