







































 
 

 

156 
© 2025 by the authors; licensee Asian Online Journal Publishing Group 
 

Economy 
Vol. 12, No. 2, 156-164, 2025 

ISSN(E) 2313-8181/ ISSN(P) 2518-0118 
DOI: 10.20448/economy.v12i2.7649 

© 2025 by the authors; licensee Asian Online Journal Publishing Group 

 
 

 
 
 
Entrepreneurship, inclusive growth and poverty reduction in Nigeria 

 
Benedict Okeke Ezeanyanwu1  

Anne Chinonye Maduka2  

Stephen Obinozie Ogwu3  

Ogochukwu Theresa Ugwunna4  

 
 

( Corresponding Author) 
 
1,2,4Department of Economics, Chukwuemeka Odumegwu Ojukwu University, Igbariam, Nigeria. 
1Email: ezeanyanwubenedict@gmail.com  
2Email: annymaduka@gmail.com  
4Email: to.ugwunna@coou.edu.ng  
3Department of Economics, Dennis Osadebay University, Asaba, Delta, Nigeria. 
3Email: stephen.ogwu@dou.edu.ng  

 
Abstract 

This study empirically examined the dynamic relationship between entrepreneurship 
development, inclusive growth, and poverty reduction from 1990 to 2021, driven by the need to 
address Nigeria's ongoing poverty. Using data from the World Bank and the Central Bank of 
Nigeria, the study aimed to establish a causal relationship between these variables using strong 
econometric techniques, such as the Granger causality test and the Fully Modified Ordinary Least 
Squares (FMOLS). The main conclusions showed that, contrary to popular opinion, 
entrepreneurship had a negative and negligible effect on poverty, whereas inclusive growth had a 
significant negative effect, demonstrating the effectiveness of entrepreneurship in reducing 
poverty. Additionally, it was discovered that entrepreneurship significantly and negatively 
affected inclusive growth. The results of the causality tests indicated a two-way relationship 
between poverty and inequality and a one-way relationship between entrepreneurship and 
poverty. Based on these findings, the study suggests that, in order to increase innovation and 
productivity, strategic investment in science and technology should go beyond simple 
entrepreneurial promotion. To guarantee that public funds are used efficiently for inclusive 
economic development, it also supports increased stimulus spending to generate employment and 
a crucial bolstering of anti-corruption organizations like the EFCC and ICPC. 

 
Keywords: Entrepreneurship, FMOLS, Inclusive growth, Nigeria, Poverty reduction. 

 
Citation | Ezeanyanwu, B. O., Maduka, A. C., Ogwu, S. O., & 
Ugwunna, O. T. (2025). Entrepreneurship, inclusive growth and 
poverty reduction in Nigeria. Economy, 12(2), 156–164. 
10.20448/economy.v12i2.7649 
History:  
Received: 29 August 2025 
Revised: 8 October 2025 
Accepted: 18 October 2025 
Published: 3 November 2025 
Licensed: This work is licensed under a Creative Commons 

Attribution 4.0 License  
Publisher:  Asian Online Journal Publishing Group 
 

Funding: This study received no specific financial support. 
Institutional Review Board Statement: Not applicable. 
Transparency: The authors confirm that the manuscript is an honest, 
accurate, and transparent account of the study; that no vital features of the 
study have been omitted; and that any discrepancies from the study as planned 
have been explained. This study followed all ethical practices during writing. 
Competing Interests: The authors declare that they have no competing 
interests. 
Authors’ Contributions: All authors contributed equally to the conception 
and design of the study. All authors have read and agreed to the published 
version of the manuscript. 

 

Contents 
1. Introduction .................................................................................................................................................................................... 157 
2. Review of Literature ...................................................................................................................................................................... 157 
3. Methodology ................................................................................................................................................................................... 159 
4. Result Presentation and Discussion ........................................................................................................................................... 160 
5. Discussion of Findings .................................................................................................................................................................. 162 
6. Conclusion and Policy Recommendations ................................................................................................................................ 163 
References ............................................................................................................................................................................................ 163 
 

 
 

 

mailto:ezeanyanwubenedict@gmail.com
mailto:annymaduka@gmail.com
mailto:to.ugwunna@coou.edu.ng
mailto:stephen.ogwu@dou.edu.ng
https://creativecommons.org/licenses/by/4.0/
https://creativecommons.org/licenses/by/4.0/
https://www.doi.org/10.20448/economy.v12i2.7632
https://orcid.org/0009-0004-4269-2233
https://orcid.org/0009-0000-7140-2937
https://orcid.org/0000-0002-3427-0426
https://orcid.org/0000-0001-7898-3391


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Contribution of this paper to the literature 
This study contributes to the limited existing literature on the impact of entrepreneurship on poverty reduction and 
examines how poverty alleviation and entrepreneurship influence inclusive growth in Nigeria. The research covers a 
critical period marked by significant policy shifts in the country, offering valuable insights and actionable policy 
recommendations for policymakers. 

 
1. Introduction 

Entrepreneurship has been considered mainly an economic growth catalyst, job creation, and poverty reduction 
agent, particularly in developing economies like Nigeria (Audretsch, Keilbach, & Lehmann, 2006; Urbano, Aparicio, 
& Audretsch, 2019). Entrepreneurship entails value production through entrepreneurial innovations, risk-taking, 
and efficient use of resources, with the prospect of generating new markets, industries, and job opportunities 
(Baumol & Strom, 2007; Dhar & Farzana, 2017). Entrepreneurs function as economic drivers of change through 
risk-taking, enhanced competitiveness, and economic vibrancy (Bosma, Content, Sanders, & Stam, 2018). 
Entrepreneurship as a tool for growth is a companion of inclusive growth, which ensures that economic benefits 
trickle down to all classes of society, particularly the poor and marginalized groups (Kabeer, 2021; Ranieri & 
Almeida Ramos, 2013). Inclusive growth entails everything regarding multi-dimensional involvement, fair 
opportunities for accessing resources, and the erasure of disparities, which are part of the long-term reduction of 
poverty (Cerra, Eichengreen, El-Ganainy, & Schindle, 2021; Samans, Blanke, Corrigan, & Drzeniek, 2015). 

In spite of the imperative need for entrepreneurship and inclusive growth, Nigeria continues to grapple with 
persistent poverty and rising unemployment. Nigeria's economic growth rate has fallen from 5.9% in 1985 to -1.8% 
in 2020, while unemployment increased nearly twofold over twenty years to 9.7% in 2020 (Uchenna, Onyekachi, & 
Chinwe, 2018). Currently, around 86.9 million Nigerians live in extreme poverty, while another 93 million 
Nigerians live below the poverty line (Olayinka, Olusegun, & Babatunde, 2015). It is a situation equivalent to 
millions of Nigerians lacking the capability to access basic staples such as food, shelter, healthcare, and education 
every day. The COVID-19 pandemic has further fueled the phenomenon, which has proven Nigeria's socioeconomic 
pillar weak (Obiakor, Iheonu, & Ihezie, 2021). 

The prevalence of poverty in Nigeria, despite increased entrepreneurial activity, supports the argument that 
Nigerian economic growth has not been inclusive. Nigerians, in general, are deprived of economic engagement, 
which has resulted in increased inequality and social exclusion. Access to basic necessities such as electricity, clean 
water, and quality education continues to be uneven, particularly in rural areas (Jaiyeola & Bayat, 2019). Such 
exclusion contradicts the function of entrepreneurship in poverty alleviation and supports the necessity of growth 
measures that, in addition to being dynamic, need to be inclusive. 

In recent years, the Nigerian government has implemented various poverty eradication and entrepreneurship 
promotion programs. Some of these programs include the Directorate of Food, Roads and Rural Infrastructure 
(DFRRI), the National Directorate of Employment (NDE), the Small and Medium Enterprise Equity Investment 
Scheme (SMEEIS), and the National Poverty Eradication Programme (NAPEP) (Farida, 2018; Yero & Abdu, 
2024). Despite these efforts, key socioeconomic indicators reveal high levels of unemployment and poverty (Alaye, 
2024). Most Nigerians, particularly youths, remain unemployed and underemployed, which perpetuates the cycle of 
poverty and discourages economic development. 

Poverty in Nigeria is multidimensional and extends beyond low income. It encompasses constrained health, 
education, basic services, social isolation, and exposure to economic shocks (Deaton, 2006). Entrepreneurship as a 
profitable venture holds significant leverage to break such a cycle by generating income, creating jobs, and 
economically empowering others (Adenutsi, 2023). With an additional inclusive growth policy, which provides 
equal access opportunities for accessing markets, resources, and opportunities, this leverage is maximized, resulting 
in social equity and sustainability of growth (Adanma & Ogunbiyi, 2024; Animashaun, Familoni, & Onyebuchi, 
2024). This study aims to empirically examine how entrepreneurship development and inclusive growth contribute 
to poverty reduction in Nigeria from 1990 to 2021. Using secondary data sourced from the World Bank 
Development Index and the Central Bank of Nigeria, the study employs advanced econometric techniques, 
including the Fully Modified Ordinary Least Squares (FMOLS) method and Granger causality tests, to examine 
both the direct effects and causal relationships among these variables. The findings will provide policymakers with 
concrete data for formulating effective policies to promote inclusive economic growth and reduce poverty in 
Nigeria. 

The paper is structured as follows: Section 2 reviews the relevant literature, Section 3 outlines the 
methodology, Section 4 presents the empirical results, and Section 5 concludes with policy recommendations. 
 

2. Review of Literature  
2.1. Conceptual Literature 

Entrepreneurship has been defined as the utilization of innovative concepts to create wealth and spur economic 
development (Shuaibu, Bin Kamin, Muhammad Isa, & Musa Cledumas, 2021; Udukeke & Usoro, 2023). 
Entrepreneurship is the discovery and utilization of new opportunities through creating new products, new 
markets, and transforming resources, which collectively spur economic development. Entrepreneurship also spurs 
poverty alleviation (Apetu, Egbetokun, Ajani, & Egbenede, 2024). Entrepreneurship development in Nigeria is, 
however, plagued with many challenges such as poor infrastructure, inadequate finance, and uncertain government 
policies, which hinder its full realization (Odeyemi¹ et al., 2024). 

Entrepreneurial success is greatly dependent on acquiring the necessary skills to enable individuals to 
innovate, generate employment, and improve livelihoods (Adejoke, 2025). The Nigerian government factored this 
in regard to youth entrepreneurship initiatives and promoting TVET for facilitating employability and 
entrepreneurship (Diyoke, 2014). Despite such interventions, there is a challenge in ensuring quality 
entrepreneurial training and practice for all (Aly, Audretsch, & Grimm, 2021). 

Inclusive growth promotes entrepreneurship because economic benefits and profits are shared fairly by all 
sections of society, including the poor (Ranieri & Almeida Ramos, 2013). Inclusive growth promotes participatory, 



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equitable, and poverty-reducing development with full access to markets, resources, and jobs (Adegboyega, 2018). 
Without inclusive growth, economic benefits will accrue to a privileged minority, causing greater inequality and 
poverty (Cerra, Lama, & Loayza, 2021). 

Nigerian poverty eradication programs like the National Directorate of Employment (NDE) and the National 
Poverty Eradication Programme (NAPEP) have been focused on employment generation and economic 
empowerment to reduce poverty (ABUBAKAR, 2023; Anuoluwapo, 2021). The programs have, however, long 
suffered from corruption, policy discontinuity, and implementation issues that have undermined their effects 
(Ibrahim, 2024). 

Generally, inclusive growth and entrepreneurship development are two complementary dimensions of poverty 
reduction. Entrepreneurship creates employment and innovation, and inclusive growth ensures that the benefits of 
economic growth are passed on to all members of society so that standards of living are improved and inequality 
decreased (UNDP, 2013). Such a postulation is supported by the present research to empirically test such linkages 
in the Nigerian context. 
 

2.2. Theoretical Review 
Entrepreneurship has been widely seen as a driver of economic growth, and it should be to a considerable 

extent due to its value creation and innovation functions. Schumpeter (1934) articulates this in his delineation of 
entrepreneurs as innovators making new products and services from novel combinations of inputs. Not only does 
this innovation activity explain economic growth, but it also contributes to employment creation and increasing 
incomes, making it central to poverty elimination (Ayoo, 2022). Inventors are motivated by a desire for discovery, 
but entrepreneurs are motivated to bring their innovations to market to make them useful, to realize abstract ideas, 
and to transform these into marketable outputs that increase productivity and economic activity. 

But entrepreneurship's role in changing and reshaping present institutions into better ones has been fulfilled 
only when there has been an environment of equal opportunities and resources. This is the concept of inclusive 
growth. Inclusive growth following Keynesian economics (Keynes, 1936) recognizes the prime role of the state in 
the development of the environment in which there can be economic participation by all. In government spending 
on infrastructure, social welfare, and measures to address increasing income disparities, inclusive growth ensures 
that benefits of economic growth are shared equally by society. Inclusive growth integrating entrepreneurial 
innovation and social justice constructs an economy in which growth translates into improved living standards for 
everybody, especially the weaker sections (Apetu et al., 2024). 

Despite such mechanisms, poverty incidence still plagues most developing economies because it is entrenched 
in deeply embedded structural barriers. According to the Structural Poverty Theory (Wilson, 1996), poverty is not 
a matter of absolute individual failure but is explained by wider demographic and economic structures such as skills 
mismatch, exclusion, and marginalization in accessing opportunities. According to the theory, unless the structural 
barriers are removed, entrepreneurship development and inclusive growth policies cannot be expected to 
contribute the maximum towards poverty alleviation Si, Ahlstrom, Wei, and Cullen (2021). Structural reforms are 
thus inevitable in order to remove these barriers and release the productive efforts of marginalized groups toward 
economic development. 

These theories present a joint model towards a multi-dimensional synergy between entrepreneurship, inclusive 
growth, and poverty reduction. Schumpeter's Innovation Theory addresses the manner in which entrepreneurial 
activity generates economic growth; Keynesian theory addresses how much a degree of equality is ensured in an 
inclusive setting; and Structural Poverty Theory addresses structural barriers to be eliminated. The enlarged 
theoretical model underlies the empirical analysis of how entrepreneurship and inclusive growth can have 
reciprocal implications on long-term poverty reduction for Nigeria. 
 

2.3. Empirical Review 
There is sufficient empirical study analyzing entrepreneurship, economic growth, inclusive growth, and 

poverty reduction and their real-world implications for the current study. Arejiogbe et al. (2023) utilized the 
structural equation model using data from 262 respondents and found that social innovation contributes to poverty 
reduction in Nigeria; therefore, social innovation should be strongly promoted through government policies to 
support poverty reduction efforts. Similarly, Azamat, Fayzullokh, and Nilufar (2023) utilized panel fixed effects 
regression for different countries and found that entrepreneurship contributes positively to poverty reduction 
across the globe; therefore, incentives towards building entrepreneurial capacity and efficiency are needed. 

From education, Goniri (2020) analyzed entrepreneurship education of Nigeria's Maiduguri graduates using 
regression analysis and concluded that job and wealth creation are important determinants of poverty alleviation. 
The study advocated that government initiatives aimed at encouraging graduates toward job creation should 
ensure that the graduates utilize the acquired knowledge in establishing self-employment, thereby reducing 
unemployment. Ifeoma, Purity, and Yusuf (2018) also advocated entrepreneurship development as a key driver of 
Nigeria’s economic growth, employment generation, and poverty reduction. Worldwide, Bonito, Daantos, Mateo, 
and Rosete (2017) used Philippines data and concluded that entrepreneurship leads to economic progress, thus 
alleviating poverty and reducing income inequality. In Nigeria, Ogidi (2014) demonstrated the pivotal role 
undertaken by women’s entrepreneurship in poverty alleviation against Enugu State SMEs’ primary data. Ali and 
Ali (2013) have, however, demonstrated a positive but statistically insignificant relationship of entrepreneurship 
development toward poverty in Somalia, advocating that context determinants of the relationship are required. 
Kareem (2015) demonstrated a significant negative correlation between entrepreneurship and poverty in Nigeria 
using chi-square and correlation statistics, indicating that entrepreneurial ventures can help alleviate poverty. 

There has also been a lot of research on the connection between poverty reduction and inclusive growth. 
Abosede, Adebayo, and Oladele (2013) found that entrepreneurship increases economic growth through channels of 
inclusive growth. Migapet, Olayemi, and Usman (2015), however, examined financial inclusion in Nigeria and 
found that poor financial inclusion discourages inclusive growth, which increases poverty in Africa. Alekhina and 
Ganelli (2021) found that inclusive growth decreases poverty significantly in Asian countries, and Lee and Sissons 



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(2016) found that although the United Kingdom had recorded economic growth, its non-inclusiveness discourages 
poverty reduction. In Nigeria, Adegboyega (2018) confirmed that poverty decreases as economic growth increases 
and determined the contribution of inclusive growth. Munir and Ullah (2018) quoted macroeconomic stability and 
structural reforms to be effective in the achievement of inclusive growth in Pakistan. Ozughalu and Ogwumike 
(2015) believed that Nigeria, despite economic growth, has high poverty, unemployment, and inequality because 
Nigeria's human capital growth is low and the manufacturing sector's performance is weak. It called on 
policymakers to consider these issues with a view towards maximizing inclusiveness with immediate effect. 
Arabiyat, Mdanat, and Samawi (2020) applied the panel data method for 1990 to 2015 and found that trade 
openness stimulates inclusive growth, but increasing poverty and inequality undermine its impact at the national 
and provincial levels. 

Finally, Folorunsho, Osinubi, and Dada (2021) analyzed the causality relationship between entrepreneurship 
and inclusive growth in 21 African nations. The research validated that entrepreneurship and economic 
globalization positively affect inclusive growth. Causality tests validated that entrepreneurship and governance 
have bi-directional causality, a signal of variables' complexity in fostering inclusive development within the 
continent. 

Despite the overwhelming evidence regarding the economic benefits of entrepreneurship and inclusive growth 
in the direction of poverty alleviation, the literature also leads us to formidable challenges. Policy effectiveness, 
institutional quality, and resource endowment interact with each other simultaneously to influence the effectiveness 
of poverty reduction interventions. Countries that cannot escape the traps of poverty and inequality due to 
governance and infrastructure weaknesses are likely to remain ensnared. However, countries that invest 
strategically in the development of entrepreneurship, inclusive policies, and structural reforms have a greater 
chance of achieving more sustainable and equitable growth. The Nigerian experience exemplifies these forces in 
action and indicates that technological innovation and economic reforms are essential for the success of a more 
sustainable and inclusive economy capable of alleviating poverty. 
 

3. Methodology 
This research employs the Fully Modified Ordinary Least Squares (FMOLS) method to examine the role of 

entrepreneurship and inclusive growth in reducing poverty in Nigeria from 1990 to 2021. FMOLS, first introduced 
by Phillips and Hansen (1990) and later extended to panel data by Pedroni (2007) is employed to estimate long-run 
relationships between integrated variables and sidestep issues of serial correlation and endogeneity. The variables 
are integrated of I(1) and there is long-run cointegration, and hence FMOLS is appropriate and statistically 
efficient to use in this research (Lee & Chang, 2008; Onwe, Bandyopadhyay, Hamid, Rej, & Hossain, 2023).  

The theoretical foundation of the study is the Keynesian theory of poverty, which views government 
expenditure and taxation as aggregate demand and welfare stabilizers. The theory is congruent with interventions 
such as entrepreneurship and inclusive growth policies as mechanisms for poverty reduction using demand-side 
policy (Maku, Tella, & Fagbohun, 2020). 
 

3.1 Model Specification 
Guided by the Keynesian framework, the study models poverty as a function of entrepreneurship, inclusive 

growth, government expenditure, inequality, taxation, and capital formation. The baseline functional relationship is 
expressed as: 

𝑃𝑂𝑉𝑡 = 𝑓(𝐸𝑁𝑇𝑡 , 𝐼𝑁𝐺𝑅𝑡 , 𝐺𝐸𝑋𝑃𝑡 , 𝐼𝑁𝐸𝑄𝑡 , 𝐺𝐹𝐶𝐹𝑡 , 𝑇𝐴𝑋𝑡) 
The model is expressed in a log-linear econometric form as follows: 

𝑃𝑂𝑉𝑡 =  𝛼0 + 𝛽1𝐸𝑁𝑇𝑡 + 𝛽2𝑙𝑜𝑔 𝐼𝑁𝐺𝑅𝑡 + 𝛽3𝑙𝑜𝑔 𝐺𝐸𝑋𝑃𝑡 + 𝛽4𝐼𝑁𝐸𝑄𝑡 + 𝛽5𝐺𝐹𝐶𝐹𝑡 + 𝛽6𝐿𝑇𝐴𝑋𝑡 + 𝜀𝑡 
To assess the influence of entrepreneurship on inclusive growth, a second model is estimated as: 

𝐼𝑁𝐺𝑅𝑡 =  𝛼0 + 𝛽1𝐸𝑁𝑇𝑡 + 𝛽2𝑙𝑜𝑔 𝑃𝑂𝑉𝑡 + 𝛽3𝑙𝑜𝑔 𝐺𝐸𝑋𝑃𝑡 + 𝛽4𝐼𝑁𝐸𝑄𝑡 + 𝛽5𝐺𝐹𝐶𝐹𝑡 + 𝛽6𝐿𝑇𝐴𝑋𝑡 + 𝜇𝑡 
Where: 

𝑃𝑂𝑉𝑡  : Poverty (proxied by per capita income). 

𝐼𝑁𝐺𝑅𝑡: Inclusive Growth (Proxied by total labor force). 

𝐸𝑁𝑇𝑡: Entrepreneurship (Proxied by total self-employment). 

𝐺𝐸𝑋𝑃𝑡: Government Expenditure. 

𝐼𝑁𝐸𝑄𝑡: Income Inequality (Gini Coefficient). 

𝐺𝐹𝐶𝐹𝑡: Gross Fixed Capital Formation. 

𝐿𝑇𝐴𝑋𝑡: Tax Revenue. 

𝛼0: Intercept. 

𝛽1 −  𝛽6: Long-run parameters. 

𝜇𝑡, 𝜀𝑡: Error terms. 
 

3.2. Estimation Technique 
The FMOLS estimator corrects for endogeneity and serial correlation in cointegrated regressions. FMOLS 

adjusts the standard OLS estimator with semi-parametric corrections so that the long-run parameters are 
asymptotically normal and unbiased. 

Following the panel FMOLS framework of Pedroni (2007), with necessary modifications, the estimator is 
specified as follows: 

𝛽𝐹𝑀 = 𝑁−1 ∑ (∑ (𝑦𝑡
𝑇
𝑡=1 − 𝑦)2)−1𝑁

𝑖=1 (∑ (𝑇
𝑡=1 𝑦𝑡 − 𝑦))𝑍𝑡

∗ − 𝑇𝜏𝑖     (1) 

Where: 𝑍𝑡
∗= (𝑧𝑡 − 𝑧)−𝐿2𝑡

𝐿2𝑖
∆𝑦𝑡,𝜏𝑖 = 𝜋21𝑡 + 𝜑21𝑡

0 − 𝐿21𝑡
𝐿22𝑡

(𝜋22𝑡 − 𝜑22𝑡
0 ), 𝐿𝑖 denotes the lower triangular 

decomposition of 𝜑𝑖 . The similar t-statistics are given as: 

𝑡𝛽∗ = 𝑁
−1
2 ∑ 𝑡𝛽8

𝑁
𝑖=1     (2) 



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Where  𝑡𝛽∗, 𝑖 = (𝛽𝑖
∗ − 𝛽0)[𝜑11𝑖

−1 ∑ (𝑦𝑡
𝑇
𝑡=1 − 𝑦)2]1/2 

These expressions ensure that the estimation accounts for bias and inefficiency resulting from endogeneity and 
heteroskedasticity in cointegrated systems. 
 

3.3. Data and Sources 
Table 1 presents the variables of the study, measurement and sources of data. The study used a secondary 

dataset extending the period 1990–2021, sourced from the World Bank Development Indicators (WDI) and the 
Central Bank of Nigeria (CBN). The variables used for the study included poverty, inclusive growth, income 
inequality, gross fixed capital formation, entrepreneurship, government expenditure, and taxation. Similarly, E-
view was used for analysis. 

 
 
Table 1. Variables measurement and sources of data. 
Variable Measurement/Abbreviation Source 

Poverty Per capital income (LPOV) WDI 
Inclusive growth Active Labor Force (LIG) WDI 
Inequality GINI coefficient (INQ) WDI 
Gross fixed capital formation GFCF WDI 
Entrepreneurship Self-employment (ENT) WDI 
Taxation Total tax income (LTAX) OECD, CBN 
Government expenditure  Total government expenditure (LGEXP) WDI 

 

4. Result Presentation and Discussion 
Table 2 presents the descriptive statistics for the study variables.  Poverty (LPOV) had an average index of 

7.011015 with a range of 5.599236 and 8.038832, showing overall increasing poverty over the period of study. 
Entrepreneurship (ENT), with aggregate self-employment as a proxy variable, was at a mean of 82.95162 and 
ranged between 79.26835 and 85.03133, indicating a continued increase, possibly due to unemployment, high 
poverty rates, and government momentum. Inclusive growth (LIG), with active labor force as a proxy variable, was 
at a mean of 17.653322, with very little volatility, showing slow but steady improvement. Government expenditure 
(LGEXP) was at a mean of 6.022514, with a range of 3.10135 to 7.832994, indicating increasing expenditure that 
has not seemingly translated into poverty reduction, perhaps due to inefficiency. Inequality (INQ) and gross fixed 
capital formation (GFCF) had means of 41.47500 and 8.977125, respectively, with inequality potentially 
contributing to poverty and also reflecting investment tendencies in capital formation. Taxation (LTAX) was at a 
mean of 14.01916, indicating government revenue generation. The skewness and kurtosis values suggest that most 
variables are approximately normally distributed, except GFCF, which is leptokurtic in distribution. 
 
Table 2. Descriptive Statistics. 

  LPOV ENT LIG LGEXP INQ GFCF LTAX 

Mean 7.011015 82.95162 17.65332 6.022514 41.47500 8.977125 14.01916 
Median 7.278958 83.17810 17.68096 6.283532 40.10000 8.405000 14.70913 
Maximum  8.038832 85.03133 17.98186 7.832994 51.90000 18.77200 16.28155 
Minimum 5.599236 79.26835 17.27459 3.180135 35.00000 6.860000 10.55964 
Std. Dev. 0.778021 1.915550 0.210734 1.247410 6.403829 2.184002 1.817988 
Skewness  -0.244645 -0.312444 -0.238422 -0.822305 0.678807 2.910053 -0.534236 
Kurtosis  1.482920 1.634998 1.850343 2.863174 1.964300 13.69310 1.829098 
Observations 32 32 32 32 32 32 32 

Correlation LPOV ENT LIG LGEXP INQ GFCF LTAX 

LPOV  1       

ENT  -0.89935 1      

LIG  0.909275 -0.93399 1     

LGEXP  0.818797 -0.80747 0.944279 1    

INQ  -0.78902 0.818612 -0.66958 -0.44419 1   

GFCF  0.511617 -0.63018 0.661673 0.59387 -0.47758 1  

LTAX  0.930179 -0.88609 0.980932 0.936285 -0.64759 0.589188 1 

 
The lower part of Table 2 shows a strong negative correlation between entrepreneurship (ENT) and poverty 

(LPOV) at -0.8994, indicating increasing entrepreneurship and decreasing poverty in Nigeria. Inclusive growth 
(LIG) is strongly and positively correlated at 0.9093, suggesting that poverty persists despite growth, possibly due 
to deeper underlying economic structural issues. Government expenditure (LGEXP) is also strongly and positively 
correlated with poverty at 0.8188, which may indicate wastage and diversion of public spending. Inequality (INQ) 
is strongly and negatively correlated with poverty at -0.7890. Gross fixed capital formation and taxation are 
moderately and positively correlated at 0.5116 and 0.9302, respectively, reflecting their multi-dimensional and 
complex roles in Nigerian poverty dynamics. 
 
 
 
 
 
 
 
 
 



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Table 3. Unit Root Test-ADF. 

 Level First Diff. Results 

LPOV -0.6339 -4.2918*** I(1) 
ENT -0.3544 -5.0675*** I(1) 

LIG -1.5495 -3.6732*** I(1) 
LGEXP -2.3348 -6.5072*** I(1) 
INQ -1.0525 -5.3013*** I(1) 
GFCF 1.9776 -5.1372*** I(1) 
LTAX -1.8620 -5.1958*** I(1) 

    Note:   *** indicates statistical significance at 1%.  

 
Augmented Dickey-Fuller (ADF) test with an intercept was used to obtain the unit root test result indicated in 

Table 3 to determine the study variables' stationary properties. None of these variables from the results are 
stationary at levels and therefore have unit roots. After first differencing, all variables become stationary, showing 
that they are integrated of order one, I(1). This finding is significant for selecting among stationarity-at-variable-
level methods because it rules out methods like bounds cointegration tests. Since these variables' integration order 
is equal, the study proceeds to apply the Johansen cointegration test to determine whether long-run relationships 
exist among these variables. This approach allows for stable and accurate estimation of long- and short-run 
dynamics in the model. 
 
Table 4. Johansen cointegration test summary. 

Model  Test type  No. of  
Cointegrating 

Equations 

Test statistic Critical value 
(5%) 

P-value Conclusion 

1 Trace statistic 4 213.44 25.62 <0.001   Cointegration confirmed  
1 Max 

eigenvalue   
3 73.61 46.23 <0.001   Cointegration confirmed 

2 Trace statistic  4 213.44 25.62 <0.001   Cointegration confirmed 
2 Max 

eigenvalue   
3 73.61 46.23 <0.001   Cointegration confirmed  

 
Table 4 presents evidence of four cointegrating equations for both models based on the trace statistic and three 

based on the maximum eigenvalue statistic, and all are significant at 5%. These findings affirm that there is a stable 
long-run relationship between the variables, and there is a reason why the Fully Modified Ordinary Least Squares 
(FMOLS) estimator is usable in optimal long-run parameter estimation. The evidence of cointegration supports 
analyzing both the short-run and long-run relationships among entrepreneurship, inclusive growth, and poverty 
reduction in Nigeria. 

 
Table 5. Result of the FMOLS for Model One and Two. 

Variable MODEL 1: dependent variable-LPOV Variable Model 2: dependent variable- LIG 

Coefficient Std error t-value p-value  Coefficient Std error t-value p-value 

ENT -0.1379 0.0851 -1.6210 0.118 LPOV -0.0425 0.0102 -4.1469 0.000 
LIG -4.9047 1.7715 -2.7686 0.010 ENT -0.0360 0.0035 -10.178 0.000 
LGEXP 0.3026 0.1214 2.4927 0.020 LGEXP 0.0384 0.0066 5.7753 0.000 
INQ -0.0469 0.0136 -3.5545 0.001 INQ -0.0005 0.0009 -0.6084 0.548 
GFCF -0.0166 0.0220 -0.7564 0.456 GFCF 0.0050 0.0012 3.9893 0.000 
LTAX 0.5443 0.1235 4.4078 0.000 LTAX 0.0675 0.0056 12.035 0.000 
C 97.692 34.947 2.7954 0.010 C 19.738 0.2952 66.846 0.000 
 R2 = 0.946 Adj. R2 =0.932  R2 = 0.993 Adj. R2 =0.991 

 
The FMOLS regression results from Table 5 reveal the complexity of entrepreneurship’s linkages with 

inclusive growth and poverty in Nigeria. Model 1 shows that entrepreneurship (ENT) has a negative but 
insignificant effect on poverty (POV) at the 5% level. The conclusion is that although there has been growth in 
entrepreneurial pursuits fueled by the public and private sectors towards realizing the Sustainable Development 
Goals (SDGs), entrepreneurship has yet to have its effect on poverty alleviation. The result is most likely due to 
issues affecting small and medium enterprises (SMEs) that characterize Nigeria’s entrepreneurial environment. 
Such issues emanate from economic uncertainty caused by unstable exchange rates, aggressive market competition, 
and high business costs, which together threaten SME growth and survival. It is thus clear that entrepreneurship’s 
theoretical contribution towards economic development and employment creation, as has been found from other 
studies (Arejiogbe et al., 2023; Azamat et al., 2023; Kritikos, 2024) thus still lies subject to Nigeria’s economic 
environment. 

Conversely, however, inclusive growth (LIG) has a strong negative impact on poverty, with a value of -4.9047, 
and each unit increase in inclusive growth lowers poverty by roughly 5%. This aligns with Keynesian economic 
theory on mass economic participation as a primary cause of poverty alleviation (Keynes, 1936). Despite widespread 
underemployment and unemployment, even low-quality jobs help reduce poverty. This finding aligns with earlier 
empirical studies on Nigeria (Adegboyega, 2018) but refutes with others that explained little inclusive growth over 
decades (Ozughalu & Ogwumike, 2015) an indication of Nigeria's dynamic and fluid nature of its economy. 

Model two also reveals a counterintuitive outcome: entrepreneurship negatively and significantly impacts 
inclusive growth, contrary to its theoretical foundations as well as empirical proof in past studies (Folorunsho et 
al., 2021; Kritikos, 2024). Such a negative impact may reflect the informal and unregistered nature of most Nigerian 
SMEs enjoying tax holidays and operating outside formal economic streams, thus their impact on inclusive growth 
is not realized. This warrants their integration and regularization into formal economic streams to fully exploit 
their potential. 



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Expenditure by local governments (LGEXP) is a double-edged sword because it strongly promotes inclusive 
growth but causes poverty. The irony can only be explained through wastage, misallocation, corruption of public 
expenditure, theft, and political patronage that push public expenditure away from poverty-reduction programmes, 
on which rich elites predominantly benefit. Similarly, taxation (LTAX) promotes inclusive growth but discourages 
poverty reduction and thus must be a discriminatory tax system even towards poor people, thereby worsening 
economic inequalities. 

Inequality (INQ) decreases poverty significantly but has a nonsignificant, adverse effect on inclusive growth. 
Although a decomposition of inequality is essential for poverty reduction, such impacts may or may not translate 
into broader economic inclusiveness. Gross fixed capital formation (GFCF) unexpectedly increases poverty, 
possibly due to reduced investment and a declining capital stock, but positively influences inclusive growth, 
indicating a close relationship between capital accumulation and sustainable development. These findings reveal 
complex and sometimes contradictory links between entrepreneurship, poverty, inclusive growth, and fiscal policy 
in Nigeria.  

They highlight the need for comprehensive policy interventions to improve the business climate, enhance 
public financial management capacity, reduce inequality, and formalize the entrepreneurship environment. Such 
policies can unlock the full potential of entrepreneurship and inclusive growth as drivers of sustained poverty 
reduction and economic development. 
 
Table 6. Granger causality. 

 Null hypothesis: Obs. F-Statistic Prob. 

ENT does not Granger Cause POV 30 0.002 0.997 

POV does not Granger Cause ENT 3.947 0.032 
LIG does not Granger Cause POV 30 2.279 0.123 
POV does not Granger Cause LIG 0.359 0.701 
LGEXP does not Granger Cause POV 30 2.316 0.119 
POV does not Granger Cause LGEXP 0.132 0.876 
INQ does not Granger Cause POV 30 4.007 0.030 
POV does not Granger Cause INQ 5.603 0.009 

 
The outcome of the Granger causality in Table 6 shows that a unidirectional causality exists between 

entrepreneurship (ENT) and poverty (POV), running from poverty to entrepreneurship. This result aligns with the 
findings from the FMOLS regression for model 1. The causality indicates that the primary reason for promoting 
entrepreneurship in Nigeria, by the government, public and private institutions, and individuals, is poverty 
reduction. Additionally, there is no causality between inclusive growth (LIG) and poverty (POV) in Nigeria. 
Similar observations are noted between government expenditure (LGEXP) and poverty (POV). Finally, a bi-
directional causality is observed between inequality (INQ) and poverty (POV) in Nigeria, which runs from 

inequality to poverty and from poverty to inequality, although the magnitude of impact is higher in POV→INQ 

than in INQ→ POV. 
 

5. Discussion of Findings 
The FMOLS regression estimates provide a comprehensive explanation of the complex relationships between 

entrepreneurship, inclusive growth, and poverty reduction in Nigeria. Statistically, entrepreneurship has a weak 
but negative influence on poverty, indicating that despite increased entrepreneurial activities, these have not 
necessarily resulted in significant poverty reduction. This may be due to structural challenges faced by SMEs amid 
economic uncertainty, intense competition, and high operational costs, which weaken their capacity to generate 
sustainable jobs and income. Consequently, the contribution of entrepreneurship to economic growth and poverty 
reduction, as extensively documented elsewhere, appears limited by Nigeria's current economic conditions. 

In contrast, inclusive growth is negatively and strongly associated with poverty, emphasizing its inherent 
contribution toward increasing participation and living standards. The outcome aligns with Keynesian economic 
theory, which considers fair growth to be the key contributor to poverty alleviation. Despite widespread 
unemployment and underemployment, inclusive growth improves access and reduces poverty. The outcome 
supports prevailing empirical evidence in Nigeria but is contrary to evidence for narrow inclusiveness over the past 
few years, indicating Nigeria's complex and dynamic economy. 

In contrast to theoretical prediction and empirical evidence, entrepreneurship is negatively and significantly 
influential on inclusive growth. This is due to informal and unregistered Nigerian enterprises that are tax-relieved 
and beyond the scope of the formal economy; thus, their influence on inclusive growth is negligible and not 
effectively captured. This calls for faster formalization and better integration of entrepreneurial activities into the 
formal economy to maximize their development potential. 

Government expenditure is a double-edged sword and a great stimulus for inclusive growth but a cause of 
poverty. The paradox can be attributed to the fact that government expenditure is wasteful, inefficient, and 
corrupt, and that political patronage bestows privileges upon vested interest groups at the cost of antipoverty 
programs. Similarly, taxation serves as a stimulus for inclusive growth but slows down poverty reduction and 
indicates a regressive tax rate that is levied upon poor people and further intensifies economic inequalities. 

Inequality impacts poverty reduction to a large extent without any adverse effect on inclusive growth, an 
implication that poverty reduction is very responsive to reduced inequality but that reduction by itself does not 
necessarily make economic inclusiveness. Increased fixed capital formation increases poverty unexpectedly due to 
decreased investment and shortage of capital but impacts inclusive growth in a positive way, an implication of 
contribution to sustainable development by accumulation of capital. 

Together, these findings reveal the complex and sometimes contradictory relationships among 
entrepreneurship, inclusive growth, fiscal policy, and poverty reduction in Nigeria. They shed light on the 
imperative of policy harmonization to improve the business environment, public financial management, and reduce 



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inequalities, as well as formalize the entrepreneurial economy to maximize the full potential of entrepreneurship 
and inclusive growth as drivers of poverty reduction and economic development. 
 

6. Conclusion and Policy Recommendations 
Inspired by the ongoing problem of poverty in Nigeria, this study empirically examined the dynamic 

relationships between entrepreneurship development, inclusive growth, and poverty reduction from 1990 to 2021. 
Using data from the World Bank and the Central Bank of Nigeria, its main goal was to demonstrate a causal 
relationship between these variables using strong econometric techniques, such as the Granger causality test and 
the Fully Modified Ordinary Least Squares (FMOLS). The main findings showed that, in contrast to popular 
opinion, entrepreneurship has a negative and negligible effect on poverty, whereas inclusive growth has a 
significant negative effect, demonstrating the effectiveness of inclusive growth in reducing poverty. Additionally, it 
was discovered that entrepreneurship significantly and negatively affected inclusive growth. The results of the 
causality tests indicated a two-way relationship between poverty and inequality and a one-way relationship 
between entrepreneurship and poverty. The study concludes that entrepreneurship alone will not be able to fight 
poverty in Nigeria, but inclusive growth can be a force too strong to resist poverty reduction. Secondly, 
entrepreneurship's net effect on inclusive growth calls for its further integration within the formal economy 
through structural transformation. Reducing inequality is a foundation for sustainable poverty reduction. 

Priority needs to be given to bridging such gaps by creating an enabling business environment through 
improving credit access, regulatory simplicity, and infrastructure development. Capacity and skill building through 
entrepreneurship development programs should be undertaken for entrepreneurs towards their catalytic 
contribution to poverty alleviation and economic growth. Inclusive growth policies should trickle down to 
marginalized and vulnerable sections through investment in education, health, and social protection for equitable 
access to economic opportunities. Public spending must be transparent, accountable, and efficient, and must be used 
effectively to channel resources into poverty-reducing measures. Tax reform must broaden and simplify the tax 
base and aim to reduce the tax burden on the poor and transition to a more progressive tax system. Formalization 
of the entrepreneurs' sector will promote enabling environments and boost the sector's contribution to inclusive 
growth. Additionally, social protection schemes such as conditional cash transfers, food security schemes, and rural 
development schemes can be expanded further to improve livelihoods and economic inclusion among the poor. 
Institution building and governance also play a critical role in ensuring sustained inclusive growth and anti-
poverty programs. 

Taking a bird's-eye view, a broad and general approach to entrepreneurship, inclusive development and 
growth, and fiscal management and inequality is at the center of Nigeria's inclusive economic growth and poverty 
reduction. The implications of institutional factors and comparative interregional research must be examined by 
subsequent studies to further reveal such complex dynamics. 
 

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