Last year, the World Bank published its annual “Nigeria Economic Report”. It was not a palatable read on the poverty and inequality fronts. The bank said that the poverty rate in Nigeria “remains very high at more than 60 percent of the population”. It also said that there is “little evidence of recent progress in poverty reduction”, adding that this “is at odds with the general international trend of poverty reduction”. On the twin problem of inequality, World Bank’s analysis shows that the concentration of households in the middle of the Nigerian income distribution has diminished, with “increased clustering in the highest and lowest deciles”. In other words, the middle class in Nigeria is shrinking, while the ranks of the super-rich and the poor are swelling. As the vice-president, Yemi Osinbajo, constantly reminds us, more than 100 million Nigerians live below the poverty line.
This is a depressing picture. Poverty and inequality are rising in Nigeria. While other countries are experiencing a decline in their poverty rates, in Nigeria, the number of people living in poverty is growing, not decreasing! Yet the all-too-familiar paradox is that poverty exists in Nigeria in the midst of abundance. The World Bank described this as “the poverty/growth puzzle”, and posed the question: “How could the economy of the size and wealth of Nigeria have such high poverty rates?” This state of affair, of course, shames Nigeria and is a damning indictment of successive governments and leaders, who failed to grasp the nettle on this important issue.
Take former President Goodluck Jonathan’s blithe response last year to a World Bank statement on poverty in Nigeria. Livid that the World Bank ranked Nigeria among the five poorest nations, Jonathan said: “If you talk about ownership of private jets, Nigeria will be among the first 10 countries, yet they are saying that Nigeria is among the five poorest nations”. In other words, Jonathan was measuring the wealth of Nigeria by the number of its citizens who are billionaires or who own private jets. Obviously, he hadn’t read Adam Smith’s “The Wealth of Nations” or even Thomas Piketty’s “Capital in the Twenty-first Century”, which took the world by storm last year with its compelling analysis of the concentration of income and wealth in the hands of few people and the damage that this does to any economy and society. Jonathan then argued that the “challenge of this country is not poverty, but redistribution of wealth”. Leaving aside the fact that he conflated poverty and inequality as if they are necessarily the same thing, the question that his comment raises is: whose responsibility is it to ensure that the wealth of the nation is shared more equitably, if not that of the government?
Few Nigerians, perhaps, know that there is a constitutional duty on the government to reduce both inequality and poverty. For instance, on inequality, section 16(2)(c) of the constitution states that the State “shall direct” its policy towards ensuring that the economic system is “not operated in such a manner as to permit the concentration of wealth … in the hands of few individuals or of a group”. And on poverty, section 16(2)(d) requires the State to ensure that “suitable and adequate shelter, suitable and adequate food, reasonable national minimum living wage, old age care and pensions, and unemployment, sick benefits and welfare of the disabled are provided for all citizens”. Essentially, the Nigerian constitution mandates a welfare state.
So, why, despite these constitutional requirements, have successive Nigerian governments and leaders allowed inequality to grow, with the concentration of income and wealth in the hands of few Nigerians? And why have they allowed extreme poverty to exist without providing adequate safety nets? The truth is that there has been no political will to tackle the problems of poverty and inequality, and, unlike in many countries, such as the UK, there are no powerful anti-poverty and -inequality NGOs in Nigeria to put pressure on the government.
Of course, the issues involved in tackling poverty and inequality are complex and there are no easy solutions. That may be another reason why successive governments have failed to confront frontally the scourge. But the problems will not go away unless they are comprehensively tackled. And the starting point in doing so is to understand the underlying issues that cause poverty in the first place and then design a combination of policy responses to address them. Let’s consider some of the causes of poverty in Nigeria.
Without a doubt, unemployment is the biggest driver of poverty in this country. It is estimated that between 30-35 percent of the active labour force in Nigeria is unemployed, with youth unemployment believed to be over 50 percent. But poverty is also rife among those who are employed. This is known as “in-work poverty” and arises when people are in low-productivity jobs and earn poor wages. It’s amazing how many Nigerians have jobs but still live from hand to mouth. High cost of living is another driver of poverty, which is a problem particularly for those on low earnings. Then, there is the problem of informal economy. A recent study shows that the informal sector accounts for 58 percent of Nigeria’s GDP. In the UK, it is 10 percent. But the problem with the informal economy is that it doesn’t generally enable people to escape poverty.
Above all, however, most people can’t escape poverty because of their initial conditions. For instance, some missed out early in life on good education or training and are paying the price for that in adulthood. Yet most of the young Nigerians who have ‘education’ lack the relevant skills, qualifications and right attitudes that the wider job market requires. The truth is that, in general terms, good education and qualifications lead to better jobs and better wages, and can lift people out of poverty. Of course, self-employment is also a route out of poverty, but many Nigerians lack the skills, resources and support to set up and run viable and rewarding businesses of their own.
So, let’s face it, the issues are complex and there is no silver bullet. But across the world, a vast array of tools is developed to tackle poverty. These include: (i) boosting employment, through generating growth and attracting foreign direct investment, (ii) increasing incomes by paying a national living wage (note that a “living” wage is different from a “minimum” wage. The UK has just adopted the living wage approach), (iii) taking measures to reduce the cost of living, such as the prices of food, fuel, transport, etc, (iv) helping people to move from informal into formal work, with possible tax incentives, (v) providing appropriate, affordable and targeted welfare support to the most vulnerable, (vi) enabling people to escape poverty though better education and training, and (vii) promoting an entrepreneurial society by incentivising self-employment.
The key message, however, is that while welfare in the form of income transfers or what is known as the ‘pockets’ approach may have a role, what is more sustainable is the ‘prospects’ approach that helps people to protect themselves against poverty by earning more through paid jobs or self-employment. In the UK, for instance, the focus is shifting away from welfare and benefits to promoting employment to tackle poverty. One of the flagship anti-poverty programmes in OECD countries is called NEET (Not in Education, Employment or Training), which is designed to reduce the number of people who are NEET, through apprenticeships, traineeships and work experience.
What all this shows is that tackling poverty and inequality requires a coherent strategy. Indeed, a recent study by the John Rowntree Foundation in the UK, which reviewed existing evidence of poverty reduction in many countries, found that most of the countries that have reduced poverty have anti-poverty strategies. The study, however, also shows that anti-poverty strategies are more likely to succeed if they have the following eight characteristics: (i) political commitment, (ii) clear lines of responsibility and accountability for delivery, (iii) links to wider economic policy, (iv) the creation of dedicated institutions or systems of governance to support the strategy, (v) all-government approach, that is, coordination across government, (vi) effective implementation, (vii) the involvement of external stakeholders, and (viii) an effective system of monitoring and review, including measuring results against objectives.
Four of these criteria stand out. First: political commitment. Few will doubt that President Buhari and Vice President Osinbajo are strongly committed to reducing poverty and inequality in this country, and that commitment is essential to give impetus and leadership to any anti-poverty strategy. But they should ensure that the commitment runs through the bureaucracy as well. Second: the need for an economy-wide approach. Certainly, without economic growth it would be virtually impossible to reduce poverty and inequality. So, generating economic prosperity is a sine qua non of a successful anti-poverty strategy. But it’s important that the benefit of economic prosperity is shared more broadly. One way of achieving this is to empower SMEs and other entrepreneurs to participate in government projects or contracts through effective supply-chain development. This will, in fact, be consistent with the provision of section 16(2)(c) of the constitution, which prohibits the concentration of “the means of production and exchange in the hands of few individuals or of a group”. Satisfying this constitutional requirement would go a long way in reducing poverty and inequality in Nigeria.
Third: no anti-poverty strategy would be successful without active collaboration with businesses. For instance, at the heart of the UK’s employment strategy is the apprenticeship programme, which is run in partnership with industries. Clearly, the private sector has a role to play in reducing poverty in Nigeria and the government should work with the business community in developing and implementing any anti-poverty strategy.
Then, finally, don’t ignore the local governments. As the World Bank said in one report, “poverty is best tackled at the local level”. So, any anti-poverty strategy must include working through and supporting local governments, which are the tier of government closest to the people most in need.
To be sure, President Buhari will be judged by his success in reducing corruption. But Nigerians will also judge him by how much he succeeds in tackling the scourge of poverty and inequality. Buhari and Osinbajo are both credible and well-meaning on this issue. But intentions are not enough. They need a coherent strategy that works. Poverty amid plenty diminishes Nigeria. They must confront it frontally!
Olu Fasan
