Poverty over the Last 15-25 Years in Nigeria - Case Study Example

A study on the progress made in reducing poverty over the last 15-25 years in Nigeria Part One Progress that has been made in reducing poverty in Nigeria over the last 15-25 years Today, one of the main priorities for governments around the world is the reduction of poverty. Regarding this issue it is noticed by Chossudovsky (1998, 253) that ‘the World Bank framework departs sharply from established concepts and procedures for measuring poverty setting a "poverty threshold" at one dollar a day, labeling population groups with a per capita income above one dollar a day as "nonpoor". Poverty should be characterized as a major problem for Nigeria. In fact, it has been found that this country is ‘a nation that is endowed with multifarious and multitudinous resources-both human and material but due to gross mismanagement, profligate spending, kleptomania and adverse policies of various governments of Nigeria, these resources have not been optimally utilized’ (Osinubi, 2006, 53). On the other hand, many projects have been applied – but just for a short time – on Nigeria aiming to the limitation of poverty and the improvement of the conditions of life of people – especially in urban areas where the problem is more serious. However, the common characteristic of all the projects applied so far in Nigeria towards the reduction of poverty, has been their lack of appropriate planning and control. In this way, even if the projects applied are well designed, their application is not completed successfully in accordance with the standards set by the Nigerian governments (they have also been accused for their ‘participation’ in the failure of these projects). In fact, the percentage of the population living in poverty in Nigeria is extremely high. A relevant study showed that ‘an increasing number of Nigerians were living in absolute poverty over the study periods: 38% in 1985, 43% in 1992 and 47% in 1996; poverty is higher in rural areas than in urban areas; the corresponding numbers are 38%, 35% and 37% in urban areas, and 41 %, 49% and 51% in rural areas’ (Aigbokhan, 2000, 2). Another important finding of the above study is the fact that poverty in Nigeria is not equally distributed among the country’s regions. More specifically, the study of Aigbkhan (2000, 2) showed that ‘poverty incidence actually improved in the southern zones during the 1990s, but deteriorated in the north, particularly in rural areas; even so, the incidence of poverty is not uniform within the zones; in the south, poverty is higher in Akwa Ibom, Delta and Edo states and in the north in Bauchi, Jigawa and Yobe’. Because of the above situation, governments in Nigeria should follow different strategies regarding the alleviation of poverty in the country’s particular regions. On the other hand, Osinubi (2006, 53) notices that ‘Nigeria’s official statistics show that economic growth has not always been accompanied by decline in unemployment and poverty’. In other words, governments in Nigeria should take into account the following issues when designing the strategies that are targeting the reduction of poverty in the country: a) different policies should be applied among the country’s regions and b) policies should focus on the reduction of poverty and not just to the improve of local economy. The Nigerian governments have tried through the years to face poverty by introducing and applying a series of relevant projects. In accordance with Maduagwu (2000, 1) ‘the earliest poverty alleviation programmes were the 1972  Gen  Yakubu  Gowons  National  Accelerated  Food  Production  Programme  and  the  Nigerian  Agricultural  and  Co-operative  Bank,  entirely  devoted  to  funding  agriculture;  the  NAFPP  turned  out  to  be  a  colossal  waste  and  nothing  was  achieved’. The reasons for the failure of the above programme have not been explained by the government. It seems that – as already explained above – lack of appropriate cooperation and communication among the designers and the controllers of the relevant projects have led to the above result. A following effort was made approximately 14 years later, in 1986, when ‘Gen.  Babangida  established  the  Directorate  of  Food,  Roads  and  Rural  Infrastructure (DFRRI)  for  rural  development (in order to provide feeder  roads,  electricity,  and potable water and toilet facilities  for  the  rural  dwellers); however  the  projects  gulped  N1.9b (about  N80 billion  todays  value)  without  Nigerians  benefiting  from  them’ (Maduagwu, 2000, 1).  Other projects that were applied afterwards by governmental authorities like the Peoples Bank of Nigeria and the Community  Bank of Nigeria were also led to failure. However, these projects – despite the fact that finally did not achieve their target – had a role in the reduction of poverty – even temporarily – in the greater region. In fact, in accordance with a study made by Canagarajah et al. (2001, 143) ‘the headcount measure of poverty in Nigeria declined from 43 to 34% between 1985 and 1992, primarily due to a 34% increase in mean per capita household expenditures but the benefits of growth were not shared equally throughout the country’. The Nigerian government of 1999 tried to eliminate the practices followed in the past regarding the administration of the country’s financial resources. Towards this direction ‘temporary measures were implemented to limit bank liquidity, and a market determined exchange rate system was introduced in late October; however, the greater than expected proceeds from oil exports and royalties due to higher world oil prices were largely offset by shortfalls from petroleum profit tax (PPT) receipts and from payments by the Nigerian National Petroleum Corporation (NNPC) for crude oil it receives, as well as from the transfer of the consumption tax on petroleum products; consequently, the target on domestic financing of the budget, adjusted for the higher oil revenue, was missed’ (The University of Iowa Center for International Finance and Development, 2000). The government of Nigeria did not take into account the fact that not all the country’s regions have an equal level of development. On the other hand, it seems that there are other factors (apart from geography and distribution of financial resources) that have a role in the improvement of living conditions of poor people in Nigeria. Towards this direction it has been found that ‘poverty in Nigeria, in addition to its overwhelmingly rural and regional characteristics, is also strongly influenced by education, age and the nature of employment’ (Canagarajah et al., 2001, 143). The above assumption is also supported by Aasve et al. (2006, 16) who noticed – referring to the case of Ethiopia – that ‘education have strong explanatory power in urban Ethiopia, both for fertility and poverty; as expected, higher levels of education either of the household head or other household members, reduce the poverty incidence’. The above issues should be also taken into account by governments in Nigeria when designing and applying policies that are targeting the reduction of the percentage of poverty in the country. It should be noticed that the reduction of poverty in Nigeria has not been achieved by the country’s government (at least at a first stage) but instead the problem has been made worse. In fact, it has been found that ‘the country is now considered one of the 20 poorest countries in the world as over 70 per cent of the population is classified as poor, with 35 per cent living in absolute poverty; poverty is especially severe in rural areas, where social services and infrastructure are limited or non-existent’ (Rural Poverty Portal, 2007). In accordance with another research conducted in 2005 ‘by 1996, the proportion of the rural population living under the poverty line stood at 71.7 percent, up from 46 percent in 1992 while the depth of poverty in rural Nigeria was 33 compared with 18.9 percent severity during the same year’ (Anyanwu, 2005, 435). In other words, the policies applies by Nigerian governments towards the limitation of poverty in the country did not achieve the required target. Instead, poverty increased among the country especially in rural areas where the social services are limited as already explained above. Part Two Theoretical and practical trade-offs faced by the Nigerian government seeking to alleviate poverty using targeted transfer payments Nigerian economy has all prospects towards the achievement of a high rate of growth. Towards this direction it has been found in a research made by the University of Iowa (2000) that ‘Nigeria possesses abundant natural and human resources, including large reserves of oil and gas, fertile agricultural land, talented and well educated entrepreneurs, a skilled labour force, and a domestic market of 120 million people’. In accordance with the above, poverty in Nigeria should have been limited (if not eliminated) significantly. However, it seems that the country’s economy faces severe pressures. The main reasons for this situation seem to be the ‘frequent changes of government and policies as well as poor economic policy implementation that resulted in slow output growth, a lower standard of living, greater income inequality, and increased poverty’ (University of Iowa, 2000). On the other hand, Nigerian government has made a lot of attempts (as described above) in order to reduce the rates of poverty in the country. In a recent effort towards this direction, the Governor of the Central Bank, Prof. Chukwuma Charles Soludo proposed the ‘re-denomination of the national currency (the Naira) by next August’ (The Daily Sun, 2007); however such a project cannot be expected to have long term effects on Nigerian economy. In fact, other practices need to be applied in order for the country’s economy to be improved at a significant level. Adams et al. (1997, 154) made a relevant research in a series of villages of northern Nigeria and found that ‘flexibility in choice both of natural resource management strategies and of off-farm economic strategies is an important element in livelihood security’. The trade offs that have been made by the Nigerian government especially regarding the administration of the country’s natural resources have not led to the required result. In fact, a relevant research proved that ‘Shell, the biggest producer of oil in Nigeria, operated as a joint venture with the government through its local company, Shell Petroleum Development Company of Nigeria (SPDC, or Shell Nigeria); in 1995, SPDC accounted for about 14% of the Shell Groups total oil production worldwide, while the Nigerian government derived 80% of its federal revenues and 90% of its foreign exchange from royalties and taxes provided by multinational oil companies; however the ethnic minority communities, such as the Ogoni, who live in the Niger Delta where most (about 80%) of the oil was produced, saw almost no return of these revenues’ (Livesey, 2001, 67). In other words, corporate activities in Nigeria do not help towards the reduction of poverty. As always stated above the improvement of economy – in any country globally – is not related with the limitation of poverty. On the other hand, even if studies show a decline of poverty internationally, in fact there are still many developing countries (approximately 40 with a population of 400 million people) that ‘failed to register any increase in per capita income growth from 1970 to 2000’ (Nuruzzaman, 2005, 109). In accordance with a relevant report of the World Bank (2003) analyzed by Nuruzzaman ‘the absolute number of poor have continued to increase in all regions except East Asia and the Middle East. Overall, despite impressive growth performance in many large developing countries, absolute poverty worldwide is still increasing’ (Nuruzzaman, 2005, 109). The Nigerian government has applied a series of projects in order to reduce poverty in the country. Trade offs have been also included in the relevant attempts. However, poverty in Nigeria continues to rise. On the other hand, the international community supports the country continuously. Towards this direction, in 2005, aid rose to a record $10 .8 billion due to large debt relief operations, most notably for Iraq and Nigeria; in 2006, substantial debt relief to these two countries began to drop out of the equation, causing net aid disbursements to fall to $103 .9 billion – equivalent to 0.3 per cent of developed countries’ combined national income’ (United Nations, 2007). Despite the above support, poverty in Nigeria is still at a high level. As it can be seen in Table 1 approximately 92% of Nigeria population lives with an income of less than $2 dollars/ day while the distribution of income (Figure 1) is clearly in favour of the rich people in Nigeria (the total income in the country is gathered by rich people at a percentage of approximately 55%). References Aasve, A., Kedir, A., Weldegebriel, T. (2006) State Dependence and Causal Feedback of Poverty and Fertility in Ethiopia, available at http://www.iser.essex.ac.uk/pubs/workpaps/pdf/2006-30.pdf Adams, W., Mortimore, M. (1997) Agricultural Intensification and Flexibility in the Nigerian Sahel. The Geographical Journal, 163(2): 151-162 Aigbokhan, B. (2000) Poverty, growth and Inequality in Nigeria: A case study, 1-4, [Online], available at http://unpan1.un.org/intradoc/groups/public/documents/IDEP/UNPAN003895.pdf Anyanwu, J. (2005) Rural Poverty in Nigeria: Profile, Determinants and Exit Paths. African Development Review, 17(3): 435-460 Canagarajah, S., Saji T. (2001) Poverty in a Wealthy Economy: the Case of Nigeria. Journal of African Economies, 10: 143-173 Chossudovsky, M. (1998) Global Poverty in the Late 20th Century. Journal of International Affairs, 52(1): 293-303 Daily Sun. Monday, August 27, 2007, Consolidating the Naira, [Online], available at http://www.sunnewsonline.com/webpages/opinion/2007/aug/27/opinion-27-08-2007-001.htm Earth Trends (2007) Poverty resource: Nigeria, [Online], available at http://earthtrends.wri.org/povlinks/country/nigeria.php Livesey, S. (2001) Eco-Identity as Discursive Struggle: Royal Dutch/Shell, Brent Spar, and Nigeria. The Journal of Business Communication, 38(1): 58-81 Maduagwu, A. (2000) Alleviating Poverty in Nigeria. Africa Economic Analysis, [Online], available at http://www.afbis.com/analysis/alleviating__poverty.htm Nuruzzaman, M., (2005) Economic Liberalization and Poverty in the Developing Countries. Journal of Contemporary Asia, 35(1): 109-131 Rural Poverty Portal (2007) Rural Poverty in Nigeria, [Online], available at http://www.ruralpovertyportal.org/english/regions/africa/nga/index.htm Osinubi, T. (2006) An Economic Analysis Of Growth, Unemployment And Poverty In Nigeria. Journal of Applied Economics, 1: 53-68 The University of Iowa Center for International Finance and Development (2000) Memorandum on Economic and Financial Policies of the Federal Government for 2000, [Online], available at http://www.uiowa.edu/ifdebook/issues/africa/docs/doc20.shtml United Nations. 2007. The millennium development goals report, [Online] available at http://www.un.org/millenniumgoals/pdf/mdg2007.pdf Appendix Variable Value Gini Index{1} 44 Population living on less than $1/day{2} 71% Population living on less than $2/day{3} 92% Poverty Gap $1/day{4} 35% Poverty Gap $2/day{5} 60% Access to improved sanitation 44% Access to an improved water source 48% Literacy rate, all adults n/a Life expectancy, both sexes 44 years Table 1 – Poverty indicators, Nigeria (source: EarthTrends, 2007) Figure 1 – Distribution of income, Nigeria (source: Earthtrends, 2003) Read More