INCOME INEQUALITY AND INCIDENCE OF POVERTY IN NIGERIA

Published:30 Oct, 2011

Over the years the dreams and aspirations of our founding fathers have been eroded through recklessness and corruption which seems to have been the order of the day in Nigeria’s political sphere. Achieving equitable distribution of income and alleviation of poverty has for some time been a major and critical development issue.

Every country that has the intention of succeeding as a nation has an odious task of enhancing the welfare of its citizens. This should be done in such an egalitarian manner that every cadre of the workforce feels secured and adequate. The normal situation is where the income gap between citizens is not so wide as to precipitate public resentment. Income inequality has the effect of gradually building up conscious hatred and deep rooted envy against the upper class who are often perceived to be exploiting the lower class. This ugly scenario is clearly evident in Nigeria. It has further been recognised that income inequality matters when it comes to making progress on poverty reduction.

Nigeria, like many developing countries, implemented SAP policies in the 1980s, which continued in varying degrees till the late 1990s. The new democratic government in 1999 introduced further
series of reforms, culminating in the National Economic Empowerment and Development Strategy
(NEEDS) launched in mid-2004.
Following the reforms, the real growth rate became positive from 1988, turning from an average of minus 1.7 per cent in 1980/86 to 4.7 percent in 1986/92. The strong growth performance continued in the 1990s and into the 2000s, rising to 6.6 percent in 2002/2004 and 6.24 percent in 2004/2006.
However, despite this strong growth performance, poverty incidence has remained high, rising from
42.7 percent in 1992 to 65.6 percent in 1996. Although estimated to have declined to 54.4 percent in 2004, poverty incidence could still be considered high. The decline gives an annual average of 1.6 percentage points since 1997. Considering the arguments in the theoretical literature and
evidence from the empirical literature that faster economic growth is associated with faster poverty reduction, why has the rate of poverty been so high in Nigeria? Could it be a result of the apparent lack of explicit concern with inequality and inconsistency in government policies? Could it, therefore, have been because of rising income/expenditure inequality, especially since 1992? Could it be a reflection of low growth elasticity of poverty reduction in Nigeria? Could it be a direct reflection of corruption and mismanagement of funds in government hands? These are the questions that concern every Nigerian. For resource-rich countries like Nigeria, the process is exacerbated by the three processes often associated with ‘resource curse’, namely: the Dutch disease, macroeconomic volatility, and deteriorating governance. In the case of Nigeria, the emergence of ‘the black gold’ (oil) has further widened the income gap in Nigeria as those who have access to political power have the link to engage in oil business. The oil business is often used as a means of political settlement in Nigeria.

Poverty is defined today as a state of long-term deprivation of well-being, a situation considered inadequate for decent living. There is, however, much debates on how well-being should be measured and what indicators should be used. There are two broad approaches to defining wellbeing. These are the ‘welfarist’ approach and the ‘non-welfarist’ approach. The ‘welfarist’ approach defines well-being in terms of the level of utility attained by an individual. The approach attaches great importance to the individual’s perception of what is useful to him or her. The ‘non-welfarist’ approach defines well-being independently of the individual’s perception of it. The approach relies on what planners consider desirable from a social point of view. The former are frequently used by economists who generally emphasise the real consumption of goods and services. The latter favours a broader social vision and emphasises the ‘rights’ and ‘opportunities’ and ‘capabilities’ of individuals in terms of their access to resources and their potential consumption. The latter dimension has its root in the view that well-being may not be determined by actual consumption alone, but also by ‘opportunities’ for consumption, for which income may be a measure. Opportunities for consumption for the poor would from having access to remunerative employment opportunities, which could be from wage employment or self-employment. This is necessarily so since the main asset owned by the poor is human capital. The human capital could be utilised directly through access to wage employment, or through access to credit which could be used to create self-employment.

It should be noted that World Bank (2001) estimated that 70.2percent of Nigerians live on less than $1 per day. The fact that over 50 percent of total population are poor should be of concern to policy-makers. It should be noted also that a more recent estimate carried out for this report suggests that poverty incidence in 2004 may have been 57.0% instead of the 54.4% reported by National Bureau of Statistics (NBS) in 2005.

More insight into the challenge of poverty in Nigeria is gained by considering the dimension of poverty. Urban poor rose from 17.2percent in 1980 to 58.2percent in 1996. Rural poor rose from 28.3percent in 1980 to 69.3percnet in 1996.

There is also educational dimension to poverty in Nigeria. The higher the
educational attainment level the lower the incidence of poverty. Poverty is concentrated among persons with no education and those with only primary education. Welfare rises with the level of education. It implies that the less educated the head, the more likely that the household would be poor. Another worrisome trend among the private sector is the insistance of recruiting only fresh graduates below 25 years. This unfriendly labour policy places the children of the poor at a disadvantage unlike children of the rich who ordinarily enjoy uninterrupted education. This further widens the gap between children of the poor and the rich. It is also a common knowledge that children from affluent homes have easy access to gainful employment as their parents provide the needed links. Children from poor background are often left in the dark in pursuit of a decent job.
Studies have demonstrated that economic growth is critical to poverty reduction. The pace of economic growth is important. But the structure of growth is equally important, some would argue
that it is even more important. Economic growth must be broad-based and inclusive for it is to result in improved welfare.
A consequence of lopsided, non-broad based economic growth, and lack of sound economic management, is the problem of unemployment. Unemployment has become endemic and almost permanent feature of the Nigerian economy. It is estimated that an annual average of about 2.8million graduates enter the labour market, with only about 10 percent of them securing employment. Various surveys by the National Bureau of Statistics show that the unemployed constitute a critical component of the core poor.

The critical state of our economy even in the midst of huge government revenues is a sharp contrast to the level of inequality and poverty evident in the country. Nigeria which should at this stage in our nationhood be generally accepted as a developing country should not have the level of income gap as seen today. Political office holders brandish so much ill gotten wealth which is discordant with the level of skill they posse. The scenario often seen is where a renowned university professor even earns less than a local government chairman who has little or no skill comparatively. The surest way out of poverty as seen recently is involvement in politics at all cost. The members of parliament are about the highest income earners in the country even with no evident contribution to national development. It is pertinent that this unfortunate trend is tackled headlong before the national outcry turns into a massive revolution unprecedented in the history of our country.

The onus lies on the government to rise beyond the clutches of corruption and work towards the alleviation of poverty while closing the worsening gap between the rich and the poor. The creation of middle class should be the policy direction if our dear country is be navigated to the path of sustainable economic and financial prosperity. Consistent efforts should be made towards tailoring the national budgets to empower small and medium scale business owners. The time for government to act is now since the only option at the disposal of govenrment is to either create employment or increase budgetary allocation for internal security as it will be extremely difficult to manage security in the midst widespread poverty.

WRITTEN BY:

JOHN OKORONKWO
+234-806-896-2067
John.okoronkwo@hotmail.co.uk
Twitter Handle: john_okoronkwo

  • efe wanogho

    Splendid piece. The Nigerian quagmire is succinctly captured. Good job.

  • saleh buhari

    Great piece of work. More grease to your elbow.

  • nyben

    Luvly piece

  • http://facebook/onwuasoigwe.kenneth onwuasoigwe kenneth

    This piece of work is a very good and nice documentation ,in the case of issues pertaining income inequality in nigeria how best can the gap be reduced for instance ,income of senators/local government chairman etc why is that very wide compare to the educated ones like medical doctors ,professors etc in nigeria.

  • obera

    The writing is on point; poverty, unemployment, and even inflation would continue to militate against our economic growth until the right policies are implemented and institutions saddled with developmental policies are COMPELLED to discharge its functions.

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