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NIGERIA: ‘Why economic growth can’t stop poverty, inequality’

Dr. Ibrahim Aliyu is the head of economics department of the Federal College of Education, Zaria and doubles as the college’s Dean of Students’ Affairs. In this interview with Sunday Trust after delivering a paper at a national conference on growth, inequality and poverty in Nigeria, Aliyu said the economic growth, which Jonathan’s government is brandishing is the type that cannot end poverty and inequality.
Excerpts:
You just presented a paper outlining Nigeria’s growth problem; can you give us the gist of the paper?
Well, the paper examines Nigeria’s growth experience and its implications for poverty and inequality from the years 1980-2010. I examined the extent and manner in which poverty and inequality are related to the magnitude, speed and character of economic growth in the country. I also offered some explanations on why the relationship between economic growth and inequality foster or constrain poverty reduction and proffered options to aligning the process of growth and inequality to attain poverty reduction. Many countries view economic growth as the leading indicator of poverty reduction through reduced unemployment, increased household income and reduced inequality.
 
How have developing countries like Nigeria fared in poverty reduction efforts?
Empirical evidence show that developing countries achieved a 39.2 percent reduction in the percentage of their population below US$1 (PPP) per day from 1990 to 2004. This significant average gain was, however, not evenly distributed across the developing world. The largest reductions were achieved by Eastern Asia with 67.3 percent. By comparison, Southern Asia achieved a reduction of 28.2 percent, while the corresponding reduction rate for Latin and the Caribbean was 22.2 percent. Sub-Saharan Africa, which had the highest level of poverty in 1990  at 46.8 percent merely managed to reduce it to 41.1 percent in 2004, having achieved the lowest rate of reduction of 12.2 percent over the period. This is a clear indication that poverty did not respond appreciably to economic growth in Sub Saharan Africa. 
The situation in Nigeria is not significantly different.  
Economic growth measures the capacity of an economy to produce goods and services between one period and another. As I have explained in the paper by use of tables, there was negative growth in Nigerian economy between 1980 and 1985 due to the impact of the global economic recession. 
The global economic recession in the early 80s led to the collapse of world oil prices, which brought about economic deterioration in the country as manifested by fiscal crisis, foreign exchange shortage, balance of payments and debt crisis and high rate of unemployment. 
The worsening of economic conditions led to the introduction of Economic Stabilization Act of April 1982. The stabilization Act comprised a package of stringent policies and austerity measures aimed at restoring fiscal balance on the domestic front and equilibrium in the external sector. 
The short-run stabilization measures and increased regulation were not the appropriate responses to the deep-seated constraints in the economy. Government therefore, adopted in June 1986 a comprehensive Structural Adjustment Program (SAP) that signalled a radical departure from previous reform efforts. It emphasized reliance on market forces and the private sector in dealing with the fundamental problems of the economy. 
Following the introduction of SAP and policies to address the inadequacies in the economy, the programme recorded mixed results, as I have shown in the paper. 
Following the return to democratic governance in 1999, the economy grew at a sustained growth rate of 6.9 percent from 2000 to 2010, making the country the fifth fastest growing economy in the world by the year 2010.
Despite this economic growth, why do we have prevalence of poverty and unemployment?
In academics, we say inequality is multidimensional in nature and is concerned with variation in living standards across a population. It encompasses inequalities in opportunities and inequalities in outcomes. 
The UNDP describes inequality in Nigeria as a situation in which opportunities for upward mobility are very limited; it means few decent jobs, poor income and low purchasing power for the employed. It also means poor infrastructure and institutional failure in key sectors including education, health and transportation.
As I said in my paper, the national trends in inequality in Nigeria as measured by Gini coefficient decrease from 0.43 in 1985 to 0.41 in 1992 due to the impact of SAP and the positive growth rate of GDP during the period. 
Inequality rose consistently from 0.41 in 1992 to 0.49 in 2004. The trend coincided with negative growth rates of GDP recorded from 1992 to 1999.  Inequality declined from 0.49 in 2004 to 0.45 in 2010 due to the impact of NEEDS and other institutional reforms that began in 2004 and the sustained growth rate recorded during this period. 
Similarly, inequality among the geo-political zones shows a trends of variations around the national average and it declined from 2004 due to the impact of economic reforms. 
Disparities in educational attainments provide another dimension of inequalities in Nigeria. Education attainments are extremely low in the North East, North West and North Central zones where literacy is low with literacy rates of 50.6, 53.8 and 59.6 percent respectively. 
On the other hand, literacy rates in the South West, South South and South East zones are much higher at 78.6, 82.6 and 79.3 per cent respectively.
Does this inequality translate to poverty?
I said in the paper that there is no general consensus on the concept of poverty because the concept is multifaceted. Poverty manifests itself in different forms depending on the nature and extent of human deprivation. Poverty is associated with the individual or family inability to acquire enough assets, income or public utilities, inadequate education and negligible health services. 
In relative terms, people are poverty-stricken when their incomes fall radically below the community average. This means that such people cannot have what the larger society regard as the minimum necessity for a decent living.  
The poor can be identified through individuals and households lacking access to basic services, political contacts and other forms of support. It also includes household whose nutritional needs are not met adequately; ethnic minorities who are marginalized, deprived and persecuted economically, socially, morally, and politically; and individuals and households below the poverty line whose incomes are insufficient to provide for their basic needs. 
Poverty reduction or poverty alleviation is any process which seeks to reduce the level of poverty in a community, or amongst a group of people or countries. Poverty reduction programs may be aimed at economic or non-economic poverty. Some of the popular methods used are education, economic development, and income redistribution. Poverty reduction efforts may also be aimed at removing social and legal barriers to income growth among the poor.
I said in my paper that the incidence of poverty in Nigeria had worsened between 1980 and 2010 with the number of Nigerians living below poverty line increasing from 17.1 million in 1980 to 112.5 million in 2010. 
The incidence of poverty increase from 42.7 percent in 1992 to 65.6 percent in 1996 as a result of the sluggish performance of the Nigerian economy in which the growth rate was negative at – 2.76 percent. 
Therefore, the presence of growth in the face of increasing poverty is attributed to a number of factors. First, the low level of human capital development in the country particularly in Vocational and Technical Education. The World Bank in 2006 placed Nigeria in the 154th position out of 179 countries in the measurable human development index, which means that the country’s level of human development does not compare favourably to levels achieved in many other developing countries. 
For example, Malaysia is ranked 59, Thailand 76, Tunisia 92, South Africa 119, India 127 and Ghana 131. A basic interpretation of this is that, Nigeria is only better off than 27 countries in the measurable human development indices (HDI) and by implication in the quality of life of citizens. 
The structure of production and the nature of economic growth in the country are also responsible for the low response of poverty to economic growth. The structure of production was dependant mainly on two primary products. Agriculture and oil continue to dominate sectoral contribution to GDP.
The manufacturing sector has been relatively stagnant and losing its share of GDP from 6% in 1985 to an average of 4.5% between 1990 and 2007. Agriculture continues to account for more than 50 percent of employment. 
The nature of growth in Nigeria has been brought to fore by the structural disconnect in the Nigerian economy, which has continued to be a major challenge to policymakers. About 99 million or 60.5 percent of Nigerians are absolutely poor; living below the acceptable level of food intakes, have no decent clothing and no access to standard healthcare and shelter. 112 million Nigerians are relatively poor, and 99.5 million Nigerians live on less than a dollar per day. 
Across the six geopolitical zones, the North East, North West and North Central zones have high incidence of poverty across all the poverty measures than the other zones, while the South West zone has the lowest incidence of poverty. 
The Northern zones of the country have severe incidence of poverty accross all measures than the Southern zones. The high incidence of poverty in the Northern zones of the country is attributable to the low educational attainment and high level of unemployment.
Can we say that there is connection among poverty, inequality and growth especially in the north?
The relations among the three components are defined by the interactions of the processes of economic growth and equity and poverty reduction. The relationship between economic growth and poverty is influenced by the level and dynamics of inequality. 
Hence, poverty reduction depends on both economic growth and inequality. Change in poverty depends on the rate of economic growth, the response of poverty to growth and change in income distribution. 
The relations amongsts the components fail when there is failure of the market, the state and institutions. The market fails when the process of economic growth is not efficient. 
Growth is not underpinned by intersectoral linkages. Growth occurs at the cutting edge of technology, thereby releasing jobs for which the poor do not possess the necessary skills. 
From here we can say that evidence of market failure in Nigeria is manifested by low capacity utilization in the manufacturing sector. Manufacturing capacity utilization in Nigeria has declined from 75 percent in the 1970s to 40 percent in 2010 . 
There is also the issue of subsistence agricultural practices, especially in the North, and lack of value addition as well as the rising unemployment rates. Unemployment increases from 3.9 percent in 1980 to 21.4 percent in 2010.
Structural rigidities in the economy due to lack of economic transformation as evidenced by the dominance of the agricultural and oil sectors since the 1970s is also a factor. The agricultural and oil sectors account for over 60 percent of the growth in GDP by the year 2010.
The failure of the state manifests because the process of economic growth does not lead to equitable distribution of wealth in the country. 
Another issue is that the quality and effectiveness of governance becomes a major obstacle to development, as corruption impedes policy effectiveness for equitable growth. 
In Nigeria, supply of public goods and utilities are erratic and inefficient and distributional policies are ineffective or undermined by corruption leading to higher inequality.
The failure of the state in Nigeria has many manifestations including corrupt practices leading to individuals acquiring wealth through state power and through access to state contracts. 
Corruption is related to wasteful public investment, lower government revenue, and lower quality of public infrastructure. As a result, it has limited the growth potentials of the country and more importantly, initiatives against poverty and inequality. 
Corruption is also a key factor in crime, unemployment, inter-religious and communal conflicts, unrest in the Niger Delta, police brutality and other social dysfunctions in Nigeria. 
The state also fails when governance is characterized by a development path that combines high economic growth with worsening governance, which is not compatible with efforts to reduce poverty and inequality. 
High inequality points to corruption, poor quality and effectiveness of governance, absence or failure of distributional policies, significant institutional short comings in the provision of basic services, and years of mismanagement of public resources, among other causes.
What is the way out for this type of Nigeria’s growth that doesn’t tackle poverty and societal vices?
As I said in the paper, there is the need to entrench government reforms and improve governance capacity through building of institutions and processes in support of the reforms.
There is also the need to improve the rule of law and transparency through strenghening  of the existing anti-corruption laws, mechanism and institutions.
Government should promote human capital development through investment in Vocational and Technical Education and Entrepreneurship Education  in order to enhance self-employment, wealth creation, and poverty reduction.
Government should set up investment in rural areas such as investment in rural infrastructure. Government should focus on scientific agriculture, processing of agricultural produce and creating employment in the rural economy by fostering linkages between agricultural and non-agricultural activities.

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