Abstract

<p>The study analysed the effect of foreign sector aggregates on poverty reduction in Nigeria between the period of 1987 and 2022. Annual times series data on poverty headcount (POV), exchange rate (EXR), foreign direct investment inflows (FDI), official development assistance received (ODA), and external debt (XDT) were subjected to Augmented Dickey-Fuller (ADF) Unit Root test, auto-regressive distributive lag (ARDL) estimation and diagnostic tests. The result of the study indicated that at 5 percent level, EXR, FDI, ODA, and XDT significantly influenced the level of poverty in Nigeria in the short run. Further, EXR, FDI, and XDT significantly reduced poverty in Nigeria in the long run. On the other hand, there was no statistical evidence that ODA significantly influenced poverty level in the long run. The result of the diagnostic test showed that the model had structural stability and was free from the problems of serial correlation, heteroscedasticity, and misspecification error. However, the study suggested that government and policymakers in Nigeria should strategize and enact guidelines that will correct the positive effect foreign direct investment and external debt have on the level of poverty in the short term.</p>