IMPACT OF SERVICE SECTOR PERFORMANCE ON INCOME INEQUALITY IN NIGERIA

Abstract

The service sector is critical in every country’s economy. This is due to its capability in driving economic growth and development in Nigeria. This study examined the impact of service sector growth on income inequality in Nigeria for the period 1980-2025. The specific objectives of the study were: to ascertain the impact of trade sub-service sector output on income inequality, examine the impact of information and communication technology sub-service sector output on income inequality, and to investigate the impact of finance sub-service sector output on income inequality. To achieve these objectives, the Vector Error Correction Model (VECM) of estimation as well as the descriptive statistics was used.  The study revealed that the service sector output to GDP has a negative and significant impact on income inequality, information and communication service sub-sector showed a negative and significant impact on income inequality, while finance sub-service sector output was also negative and significant. The study recommend that the negative coefficient of trade sub-service sector output suggests that increase in the volume of trade services led to increase in income generation by household thereby, reducing income gap, this situation has also led to poverty reduction in Nigeria. The significant coefficient of information and communication sub-service sector output, showed that a rise in the number of ICT users and entrepreneurs can help reduce income inequality in Nigeria. Similarly, the negative coefficient of finance service sector output shows that an increase in financial credit could boost private investment, generate employment and increase capital accumulation.