Modelling structural breaks in social cash transfers effects on poverty and inequality reduction in Africa: A case of Nigeria

Abstract

Poverty and inequality have become persistent challenges in African countries, hindering sustainable development and equitable economic growth. Against this backdrop, the Nigerian government introduced social cash transfer (SCT) programmes to provide targeted financial assistance to vulnerable populations and foster inclusive social welfare. However, the impact has been somewhat indefinable given the continued increase in poverty and inequality levels in Nigeria. Thus, this present study focuses on the effect of SCTs on poverty, inequality, and macroeconomic instability in Nigeria using secondary data for the periods of 1984 to 2021. The results of the Dynamic Ordinary Least Squares (DOLS) and Fully Modified Ordinary Least Squares (FMOLS) with structural breaks showed that, individually, SCTs significantly increase the levels of poverty, inequality and inflation in Nigeria, but when we considered structural breaks and moderated effects of institutional peculiarities of less developed countries such as Nigeria using control of corruption and accountability, social cash transfers reduced poverty and inequality levels as well as macroeconomic instability in Nigeria. Findings from this study reveal that SCTs have played a pivotal role in improving the well-being of beneficiaries by providing crucial financial support, which, in turn, has contributed to reducing the incidence of poverty and mitigating income disparities among households. Our findings serve as a useful benchmark for the government, policymakers, and Non-Governmental Organizations (NGOs) for evaluating the effectiveness of SCT policies and other social welfare strategies in Nigeria toward evidence-based poverty alleviation and inequality reduction strategies, given the present socio-economic challenges. JEL Classification: E02, H55, I32, M14