THE IMPACT OF FOOD SECURITY AND MICROFINANCE INSTITUTIONS ON INCLUSIVE GROWTH IN NIGERIA

Abstract

Food security in Nigeria remains severely strained as entrenched poverty, vulnerable agricultural systems, and rising inequality continue to threaten livelihoods. With millions facing hunger and economic exclusion, microfinance institutions offers a strategic pathway to inclusive growth by strengthening smallholder productivity, expanding access to finance, and empowering households to build resilient, sustainable economic futures. Against this backdrop, this study examined the impact of food security and the role of microfinance institutions on inclusive growth in Nigeria from 1985 to 2024, using the Autoregressive Distributed Lag (ARDL) model to evaluate both short-run dynamics and long-run relationships. The bounds test results show no evidence of a long-run relationship among the variables, implying that food security indicators and microfinance variables do not exhibit a stable long-term equilibrium relationship with poverty in Nigeria. However, the short-run ARDL estimates reveal that the lending interest rate, the prevalence of undernourishment, and microfinance bank loans to the agricultural sector exhibit negative but statistically insignificant relationships with the poverty rate. In contrast, the food production index and the number of borrowers show positive but insignificant relationships with poverty in the short run, indicating that increases in these variables are associated with short-term rises in poverty levels. Conclusively, although no long-run relationship exists, short-run interactions indicate that food security conditions and microfinance activities are linked to the trend in Nigeria's poverty rate. Therefore, policies should prioritize improving credit allocation efficiency, lowering lending rates, and ensuring that microfinance resources effectively target productive agricultural activities to enhance inclusive growth outcomes.