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Abstract

The paper examines the effect of export diversification/concentration on income inequality in Nigeria during the period 1981-2015, while controlling for the effects of financial development, inflation, and exchange rate. It employs the dynamic OLS estimator for analysis of relevant data. The study finds positive and significant effect of export concentration on income inequality, implying that export concentration contributes significantly to income inequality in the country. This suggests that export diversification will serve to reduce income inequality therein. The study also finds that inflation and currency depreciation engenders increase in income inequality. This is indicated by the estimated positive and significant coefficients of inflation and exchange rate variables. However, the income-inequality effect of financial development is found to be negative and significant, suggesting that financial development tends to reduce income inequality in the country. Measures to reduce income inequality recommended by the study based on the empirical evidence include efforts by the government to diversify the nation’s exports basket away from crude oil to manufactures and other value added products and services, as well as expand the markets (or destinations) of her exports items through economic diversification and implementation of investment- and export-friendly policies; development of the financial system; control of inflation to attain price stability (or low inflation, preferably single-digit inflation) using appropriate monetary and fiscal policy instruments; and strengthening of the national currency.