Friday, 7 March 2014
Nigeria: Rich Country, Poor People By Nasir Ahmad El-Rufai
If President Goodluck Jonathan had had the courage to publicly declare his assets and that of his wife, the venerable Dame Patience Jonathan, it would have been possible to use Nigeria’s first family to undertake an assessment of the incidence of poverty in the country and explore why one of the richest countries in the world has some of the poorest people. While we await the president on this matter, one needs not travel too far to see evidence of poverty; just look around.
Though Nigeria’s population is three times that of South Africa, our economy is second to theirs in Africa. We are the 37th largest economy in the world, and 11th in terms of labour force (about 48 million, according to 2010 estimates). So how come we are one of the most impoverished countries in Africa and the 25th poorest in the world? Global average income is about $25 per person per day, or $9,000 per annum. In Nigeria, about half of our citizens live under $2 a day – on the threshold of poverty. Two-thirds of the population lives under or around $1.25 a day – in extreme poverty. This is because our economic growth since Independence has bypassed the poor. Reviewing global Gini coefficients which measure income inequality within nations, Nigeria is one of the most unequal nations in Africa and the world. And like many other resource-rich nations, our 'enclave growth' has not led to sustainable job opportunities. This means that our so-called economic growth only benefits a narrow band of Nigerians – whether under dictatorships or democratic rule.
While our economy grew, the incomes of the poor have not, even with the new minimum wage. This is especially true of the rural and urban poor who together, account for much of Nigerian poverty. At current rates, it is estimated that by 2015, Nigeria will have more poor people than India and China who have more than a billion people each. In contrast, China and India have lifted more than 600 million out of poverty in the last twenty years of economic growth. In fact, the World Bank includes Nigeria in the list of top 15 places with the highest incidence of poverty. Of our 162 million people, 90 million live below the poverty level of $2 a day, despite billions of dollars in oil revenues.
In 1980 only an estimated 27 percent of Nigerians lived in poverty. By 1990, it had grown to 70 percent. In 2010, over 58 percent of our population lived under the new poverty threshold of $1.25 a day. Though unevenly distributed across Nigeria, poverty is higher in north east and less evident in the southwest. An analysis of public investments in infrastructure and human capital in the north-east would explain why the region is not only home to flawed elections and economic hopelessness but the Boko Haram insurgency as well. Indeed, most of the apparent ethnic and religious crises in the north, and the youth violence and criminality in the south can be linked to increasing economic inequality and hopelessness due to governance failures!
Nigeria’s poor are in two distinct groups: the working and non-working population. Poverty is prevalent in both rural and urban areas, though large numbers of rural folk constantly migrate to urban areas in search of work. This is not unconnected to the fact that typical households in rural areas only cultivate 1 hectare of land annually which is only capable of producing about N80, 000 worth of food crops. From this, the household may earn N80, 000 ($500) or N219 per day, for a family of 6-7 people. Each member of that family lives on approximately N32-37 per day. Supplementary income from cattle, fishing or other wage labour, does not amount to much.
The urban poor – mostly uneducated and unskilled migrants from rural poverty – only have their physical bodies as capital. Urban wages may be higher than the rural, (for the same kind of work, urban wage rate can be 50–100% higher), but workers sometimes end up poorer because most of their meager earnings is consumed by the higher costs of living. With the new minimum wage, the typical urban poor earns between N18,000-20,000 (or N240,000 annually). This translates to approximately N658 per day and in the smaller urban household of 4 would amount to N164 per person per day - less than the poverty line of N200 a day.
Of our 90 million poor people, 60 million are dependants. This leaves approximately 30 million ‘working poor’ whose income has to be raised from the current level of less than N200 to at least N700 daily. The family system remains the medium of transmission of sustenance for the unemployed. This is ineluctable for now. Illiteracy and poverty are related; twenty centuries after the development of scripts and the numeric systems, about 44% of our population still lack basic literacy and numeracy skills. Though no precise study exists, it is a reasonable guess that illiterates comprise the poorest income group.
Unemployment is at the heart of Nigeria’s poverty. There are few activities in the rural areas that create jobs apart from labour intensive agriculture; even this is seasonal. The landless farm labourers have little to do in the off-season, unless they seek work in the urban areas. Inadequacy of basic amenities like clean water, education, and health care further compounds the matter. The poor have no access to low interest funds, business development services and formalization channels. And because government lacks functional and effective strategies to fight poverty, one of the richest countries in the world has some of the poorest people.
This is not to say that successive governments did not try. The Gowon Administration initiated the first planned effort to tackle poverty in 1972 with a focus on agriculture. The National Accelerated Food Production Programme (NAFPP) and the Nigerian Agricultural and Co-operative Bank (NACB) were created to finance agriculture but didn’t achieve much. Operation Feed the Nation was introduced in 1976 but its attempt to woo university undergraduates to rural areas to teach peasant, and mostly subsistence farmers how to farm failed. In 1979, the Shagari administration launched the Green Revolution scheme to curtail food importation and boost crop and fibre production, but compromised it by creating a task force to import rice! By 1983, billions had been wasted on these efforts with little to show for it.
In 1984, the Buhari administration introduced ‘Back to Land’ and tied the issuing of import licenses to the potential licensee's levels of investment in agriculture. Sadly, the government was overthrown before the scheme matured. Babangida’s government created the Directorate of Food, Roads and Rural Infrastructure (DFRRI) in 1986. Neither DFRRI, nor the Peoples Bank of Nigeria and the Community Banks programme made any lasting impact. In 1993 the Abacha government established the Family Support Programme (FSP) and the Family Economic Advancement Programme (FEAP). Again, they failed to succeed in tackling poverty. In 2001, President Obasanjo launched the National Poverty Eradication Programme (NAPEP) with the mandate of developing and coordinating all poverty eradication initiatives in Nigeria. NAPEP seems to have become a sales agent for Bajaj and other tricycle manufacturers of India, instead of addressing the fundamentals of poverty - income inequality, lack of opportunity and support for micro-enterprises.
What are the options before us, and what are the fastest ways of reducing poverty in Nigeria?
An important starting point is to focus on the 30 million ‘working poor’ who have 60 million dependants. To lift 90 million people above the poverty threshold of $2 daily, each of the 15 million households (6 persons per family) must earn $12 daily. This amounts to $65.7 billion annually or N10.5 trillion. Of this, N7.2 trillion will go to the dependants, but it is unrealistic for government to give out N7.2 trillion annually. In the absence of a national social safety net or the means to design one, the way out must be the creation of sustainable opportunities, incentives and better paying jobs. Macroeconomics alone cannot help without strategic planning and implementation, as well as targeted microeconomic interventions, which only the CBN governor seems to be doing so far!
Charity, welfare and aid initiatives are not enough, nor do they work. Even if poverty alleviation funds were collected through taxation or voluntary contributions, it is highly doubtful if they can be efficiently delivered. Government cannot create enough jobs to absorb the 3 million that join the workforce every year. Only the private sector can create the jobs needed in our nation. Thus, government must develop the enabling environment for job creation by others. Inaugurating a job creation committee and allocating N50 billion to it does not create jobs. The Yar'Adua-Jonathan approach of creating new agencies and ministries that duplicate the work of another and increasing the cost of governance without any results will neither reduce unemployment nor poverty.
Agriculture is the biggest employer of labour and we must address policies that promote it. For instance, the Nigerian Institute of Oceanography and Marine Research says Nigeria spends $800 million on fish importation annually. We spend more to import rice, sugar, vegetable oil, wheat and other produce we can grow or produce locally. We must save these huge sums and reinvest same in the Nigerian economy in creative ways.
Infrastructure development is also critical not only in creating construction jobs and reducing poverty, but providing the enabling environment for the private sector to flourish. Nigeria is planning to spend about 1 trillion naira on the Niger Delta Coastal Highway. How many permanent and seasonal jobs does government plan to generate from the project? It may be useful for government to insist on knowing how many jobs every million naira in government contracts and expenditure create. Considering the monumental shortages in our infrastructure sector, it is surprising that government is yet to conceive an infrastructure master plan and public works programme capable of creating millions of jobs over the next few years.
Unless we take measures to raise family incomes, create sustainable and better paying job opportunities, build critical infrastructure, and optimally develop agriculture, Nigeria will remain a rich nation with very poor people. This is not the destiny of one of the world’s richest countries, and certainly not what Nigerians deserve. But the political elite may not care for now. After all, the standards of living they enjoy are equal or higher than the rich in developed nations, with lesser income inequality like the UK. That was before the protests, riots and looting by largely bored and unhappy young people a couple of weeks ago. It is time for the political and economic elite to work on making our incomes more equal, by rewarding entrepreneurship, innovation, honesty and hard work. Reliance on luck will not take us any further than where we are.