Review Of Inequality In Nigeria: Exploring The Drivers

Reviewer

Dr. Otive Igbuzor

otive.igbuzor@centrelsd.org

INTRODUCTION

The problem of inequality is one of the greatest challenges facing mankind today. The past five decades have witnessed monumental changes in the world. Global economic wealth has increased sevenfold and average incomes have tripled.[1] Yet, poverty has increased to record high levels. The major problem is that wealth is concentrated in the hands of a few people while majority of the people live in abject poverty. The United Nations Development Programme (UNDP) in its 1998 report documented that the three richest people in the world have assets that exceed the combined Gross Domestic Product (GDP) of the 48 least developed countries. In 2015, the sixty-two richest people in the world had the same wealth as the poorest 50 percent (3.5 billion people). In the Organisation for Economic Co-operation and Development (OECD) countries, income inequality is at its highest level in the last fifty years. The average income of the richest 10 percent of the population is about nine times that of the poorest 10 percent.[2]  It has been documented that the drivers of inequalities across the world include globalization, skilled biased technological change and changes in countries policy approaches (ascendancy of neo-liberalism).

As the Oxfam report on Inequality in Nigeria clearly stated, the scale of inequality in Nigeria is extreme. In this review, we will examine the content of the report and show the implications for the development of Nigeria.

THE REORT

The 54-paged report titled Inequality in Nigeria: Exploring the Drivers provides a picture of the current state of poverty and economic inequality in Nigeria, identifies the main drivers of this situation and presents some policy solutions (Page 4).

Current State of Poverty and economic inequality in Nigeria

The report indicates that poverty in Nigeria is very high and that the country is among the 30 most unequal countries in the world (page 9). As at 2010, more than 112 million people were living in poverty. According to the 2015 Human Development report, Nigeria had the highest number of people living in multi-dimensional poverty (88.4 million) in the world, followed by Pakistan (83 million) and Ethiopia (78.9 million) (Page 16).

The report shows that the gap between the rich and the poor in Nigeria is very wide. According to World Bank data, in 2009, the poorest half of the population held only 22 percent of national income (page 9). Meanwhile, the richest Nigerian man will take 42 years to spend all his wealth at one million per day (page 4). The report notes that the amount of money that the richest Nigerian man can earn annually from his wealth is sufficient to lift 2 million people out of poverty for one year. Similarly, Nigerian lawmakers are one of the best paid in the world: the average annual salary is $118,000 equivalent to 63 times the country’s per capita (in 2013)(page 5).  So, we have “the world’s highest paid lawmakers preside over some of its poorest people.” (page 9).

The report points out that the annual economic growth averaged over 7 % in the 2000s. (page 13). But the paradox is that as the country gets richer, only a few benefit and majority continues to suffer from poverty and deprivation (page 9).

An interesting dimension of the report is regional inequality between the regions and the states with poverty incidence being highest in the North west (71.4%), followed by North East at 69.1 % and North Central at 60.7 %. The South West has the lowest poverty rate at of 49.8 % followed by the South South  (55.5%) and South East (59.5%). There is also gender inequality mediated through a myriad of discriminatory traditional and socio-cultural practices that put women at disadvantage in a number of areas compared to men (page 4).  The statistics are chilling: In Jigawa State, 94 % of women (against 42% of men) are illiterate. Nigeria has one of the lowest rates of female entrepreneurship in Sub-Saharan Africa (page 18). Nigeria is the country with the lowest share of female parliamentarians in Sub-Saharan Africa (page 20).  Nigeria is also at the top of the list of countries with the highest number of children out of school (10.1 million). (page 25).

Main Drivers of Poverty and Inequality in Nigeria

The report identified the main drivers of poverty and inequality in Nigeria to include the following:

1.      Retrogressive Taxation: In Nigeria, the poor is taxed heavily and the rich and big multinational receive questionable tax waivers, tax holidays and loopholes for tax avoidance.

2.      Poor Budgeting System and Allocation: The share of government budget which are allocated to education, health and social protection (three critical policy areas to tackle poverty and inequality) are among the lowest in Africa. (page 24). For example, in 2012, 6.5 % of the budget was allocated to education, 3.5 % to health and 6.7 % to social protection (in 2010). By comparison, in Ghana, these shares were respectively 18.5 % (in 2015) , 13.8 % (in 2015) and 9.1 % (in 2010).  The end result is that from 2005 to 2015, a total of N77 trillion was appropriated through budgets towards the development of the country, yet the state of roads, electricity and water supply, schools and hospitals remain inadequate to meet even the basic needs for a large part of the population.

3.      Poor resource management and poor policy implementation: The resources allocated to provide services to citizens are poorly managed leading to service failures. This led to a situation documented in a case study in the report where Eno, an 18 years woman who could not afford hospital services was delivered by a traditional birth attendant and was “detained by the midwife for over a week until she paid the N1,000 ($5) delivery fee.”

4.      Elite Capture, Cronyism and Favouritism: Elite capture of public sector policies and resources undermines the productivity of the most important sectors of the economy and prevents the fair distribution of the benefits of growth. For instance, “the mismanagement of the $16 billion appropriated to improve electricity supply during the 8 years of the Obasanjo regime from 1999 to 2006.” (page 28).  On NDDC, the report documents that “often, rogue contractors discard the projects, in collusion with political leaders and NDDC officials.” (page 42)

5.      Prohibitive Cost of Governance: The cost of governance is very high and the expenditure is made to benefit a few. As stated in the report, “the ruling class constituted by the few, establishes and legitimises an exploitative property system through which it determines the allocation of opportunities, income and wealth, relying on the use of state power, including the use of oppressive state agents such as the police and armed forces.”(page 32).

Policy Solutions

This report Inequality in Nigeria: Exploring the Drivers by Oxfam is a sad commentary on the development trajectory of Nigeria. However, despite the depressing statistics and the huge problems identified, the report clearly states that “deliberate policy interventions and political commitment, backed by an active, vibrant civil society and enlightened, proactive citizens can break the cycle.” (page 7).  The report prescribes some policy solutions which are essentially designed to arrest the drivers of poverty and inequality in Nigeria. The solutions can be categorised into the following groups:

a.      Laws and Policies: In a country where majority of the people are poor, the laws and policies should be made to be favourable to the poor and not the rich. There is an urgent need to implementation of the National Gender Policy 2014 and the Violence against Persons Prohibition (VAPP) Act 2015 and passage of Gender and Equal Opportunities Bill.

b.      Progressive Taxation: Nigeria need to institute a tax system that is more progressive and close the loopholes that allow for tax avoidance and tax dodging in all tiers of government.

c.       Addressing unemployment and civic inclusion: The government need to tackle the unemployment crisis in the country through several means including driving inclusive growth; creating new job opportunities; reviving local manufacturing; promoting the ease of doing business in Nigeria; improving infrastructure; harnessing the entrepreneurial spirit of Nigerians; establishing industrial clusters and technology centres; promoting start-ups and encouraging ICT talents, hubs and villages.

d.      Addressing Corruption: by displaying political will; ensuring justice, recovering looted funds and building institutions.

e.      Addressing the Political/Elite capture: by creating enabling environment for sustainable wealth creation; promoting oversight, accountability and social justice.

f.        Supporting Small scale farmers who produce over 80 percent of total agricultural output.

g.      Promoting and encouraging active citizenship by promoting civic education; budget literacy and monitoring and building grass roots movements to institute a new leadership culture where citizens are capable of taking responsibility for themselves and their communities.

 

IMPLICATIONS OF THE REPORT FOR THE DEVELOPMENT OF NIGERIA

This report has great implications for the development of Nigeria. There are implications for approach to development, the way government is doing business and the response of citizens to the challenges of development in Nigeria. The report has shown clearly that it is a wrong approach to just focus on economic growth without concern on how the resources of the county are distributed. Therefore, to arrest poverty and inequality in Nigeria, there must be change in the development trajectory. There is a consensus among scholars and development practitioners that rapid and sustained poverty reduction requires inclusive growth that allows people to contribute to and benefit from economic growth.[3]  Inclusiveness encompasses equity, equality of opportunity and protection in market and employment. Inclusive growth refers to both the pace and pattern of growth. It is about raising the pace of growth and enlarging the size of the economy while levelling the playing field for investment and increasing productive employment opportunities.[4] Inclusive growth is a concept that advances equitable opportunities for economic participation during economic growth with benefits incurred by every section of society.[5]  Inclusive growth aims to improve living standards and share the benefits of increased prosperity more evenly across social groups.[6]

It has been established that wile sustaining high economic growth is a necessary condition for poverty reduction, it is not a sufficient condition for an equitable distribution of wealth.[7] As stated in the report, Nigeria witnessed economic growth of over 7 % in the 2000s. One of the major problems is that economic growth in Nigeria has not created meaningful employment as many of the country’s youth including those with university degrees are currently unemployed.[8]  The problem is that Nigeria’s economic growth was driven, in part, by rising global oil prices.[9] The manufacturing sector in Nigeria represents only 4 percent of GDP compared to 20 percent in Brazil, 34 percent in China, 30 percent in Malaysia, 35 percent in Thailand and 28 percent in Indonesia.[10]  Meanwhile, it has been shown that “no country can banish mass poverty unless it creates millions of new jobs a year in manufacturing and services.”[11] There is therefore a compelling imperative for inclusive growth in Nigeria.

As the UNDP report on Nigeria 2008-2009 has shown, any development strategy for Nigeria must address four courses of action:

1.      Maintain a strong and focused emphasis on inclusive economic growth

2.      Guarantee better access to social services and adequate infrastructure especially for the poor

3.      Target policy interventions to protect the poorest or the most vulnerable group and

4.      Promote transparent, responsible and accountable governance.

On 7th March, 2017, the Federal Government released the Economic Recovery and Growth Plan (EGRP) targeting growth rate of 7 percent by 2020.[12] The EGRP recognises that “majority of Nigerians remain under the burden of poverty, inequality and unemployment” partly as a result of “corruption and mismanagement of public finances.” (page 10) The plan aspires to change “the national economic trajectory in a fundamental way.” (page 10).[13]  It is a good thing that the government now has a plan which promises to prioritise focused implementation; bring bold initiatives (increasing oil production, environmental restoration and diversification); build upon sectoral strategies; promote innovation; align budget with plans and collaborate and co-ordinate with state governments. It is also appropriate that the ERGP plans to invest in the Nigerian people by increasing social inclusion, creating jobs and improving human capital base of the economy.  But the government of Nigeria needs a long-term plan for radical re-orientation and complete change on the way government is run; strategy for managing change; leadership; political will, co-ordination and synergy and capacity for execution.

Secondly, there is the need for change in how government business is done.   In line with the recommendations of the report, all laws and policies of government at all levels in Nigeria should be made to be favourable to the poor. Policy Science has developed to the level that you can calculate which class of people benefits from any policy. For instance, the housing policy of government at all levels should be titled towards social housing instead of the concept of Public Private Partnership that gives land to private companies to allocate plots to citizens at exorbitant rates. Only the rich can benefit from such programmes.  A clear example of policy that benefits poor people is the Social Investment Programme (SIP) including the cash transfers. Government is hereby commended for this project. There is the need for effective implementation according to the design and indeed the need for scale up to benefit more poor people. In addition, government at all levels must show respect to the laws that it has enacted such as the Public Procurement Act, Fiscal Responsibility Act and the Electoral Act. When government officials and agencies brazenly and openly violates its own laws, it is an invitation to impunity and anarchy. Similarly, government should implement the policies that it has formulated such as National Gender Policy and Youth Policy. In addition, the process of making the budget, the content of the budget and implementation must be changed radically. The process of selecting projects should involve citizens. The percentage of capital expenditure need to be increased phenomenally from the current 30 percent. More allocation should be given to the sectors that will impact on poverty especially agriculture, health, education and infrastructure. Implementation of the budget should be monitored by legislators and civil society. Legislators and civil society need to work together in a systematic and synergistic manner. The implementation of the budget need to be more clinical with clear operating plans and competent personnel. Public Finance Management reform need to be continued and deepened. In the financial management system, discretion should be eliminated as much as possible and technology should be utilised. In most countries of the world for instance, nobody issues manual receipts at airport gates. The fees are collected electronically.  These avenues make corruptible transactions easy. Government should prioritise citizens’ engagement, simplification of collection of revenues and utilisation of technology. The Federal Government has made the commendable move of joining the Open Government Partnership (OGP) which places a lot of premium on citizens’  engagement, fiscal transparency, access to information and anti-corruption.  Government should implement the National Action Plan (NAP) of the Open Government Partnership and establish permanent dialogue mechanism with citizens. Government should address the challenges facing the youth and prioritise youth development and youth employment. Many of the poor in Nigeria engage in agriculture. Government should support agriculture through the provision of inputs (fertilizers, seeds and crop protection products), access to finance, access to market and prevention of post-harvest losses.

Finally, citizens need to change their approach to the challenges confronting the development of the country. Through lived experience, the average Nigerian speaks like a professor of Political economy in describing and analysing the problems facing the country. The social media is awash with complaints and abuse of leaders especially political office holders and religious leaders. Citizens need to go beyond this level. Every society gets the type of leaders they deserve. Persons of integrity need to step out to participate in politics for as Plato reminds us, the penalty of refusing to participate in politics is that you will be ruled by your inferiors. Citizens need to stop demanding and collecting money from politicians during elections or making atrocious financial demand on public officials. Citizens need to organise themselves at various levels-town unions, business associations, faith based organisations, professional groups, youth groups, women groups, persons living with disability, persons living with albinism, etc and hold their leaders accountable. The power of citizens is their number. Power and Sovereignty belongs to the people. We cannot continue to allow a tiny few to benefit from our society while the majority wallow in abject poverty and hunger. The time to act is now.

God bless Nigeria.

ENDNOTES


[1] Watkins, Kevin (2000), The Oxfam Poverty Report. An Oxfam Publication

[2] Oxfam

[3] Ianchovichina, E and Lundstrom, S (2009), What is Inclusive Growth? Note prepared for Donors Supporting the Diagnostic Facility for Shared Growth. www.siteresources.worldbank.org

[4] Ibid

[6] OECD (2014) All on Board: Making Inclusive Growth Happen.

[7] UNDP (2009), Human Development Report Nigeria 2008-2009: Achieving Growth with Equity.

[8]Ogbu, O (2012), Toward Inclusive Growth in Nigeria. Washington, The Brookings Institution.

[9] ibid

[10] Ibid

[11]Rajadhyaksha, N (2012), “India’s New Industrial Policy” liveMint.com & The Wall Street Journal, February 17, 2012. Quoted in Ogbu, O (2012) Op cit

[12]  Business News 9th March, 2017

[13] Economic Recovery and Growth Plan (EGRP)

[1] Watkins, Kevin (2000), The Oxfam Poverty Report. An Oxfam Publication

[1] Oxfam

[1] Ianchovichina, E and Lundstrom, S (2009), What is Inclusive Growth? Note prepared for Donors Supporting the Diagnostic Facility for Shared Growth. www.siteresources.worldbank.org

[1] Ibid

[1] Wikipedia www.en.wikipedia.org

[1] OECD (2014) All on Board: Making Inclusive Growth Happen.

[1] UNDP (2009), Human Development Report Nigeria 2008-2009: Achieving Growth with Equity.

[1]Ogbu, O (2012), Toward Inclusive Growth in Nigeria. Washington, The Brookings Institution.

[1] ibid

[1] Ibid

[1]Rajadhyaksha, N (2012), “India’s New Industrial Policy” liveMint.com & The Wall Street Journal, February 17, 2012. Quoted in Ogbu, O (2012) Op cit

[1]  Business News 9th March, 2017

[1] Economic Recovery and Growth Plan (EGRP)