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.