Report: Income Inequality Skewed Wealth, Resources to Pockets of 20% of Nigerians

Obinna Chima

The high rate of income inequality has skewed wealth and resources in the country away from the masses to the pockets of the top 20 per cent, a report has stated.
The Financial Derivatives Company Limited (FDC), which stated this in its latest monthly economic bulletin, noted that given Nigeria’s level of development, such level of inequality was no surprise.

Nevertheless, it pointed out that such a situation raises a cause for alarm.
As measured by the Gini Coefficient, Nigeria ranks second out of 16 West African countries, nineth out of 54 African countries and 26th out of over 190 countries in the world.

“Those at the bottom of the in-come pyramid, who number over 100 million, brawl over a measly portion of the national income pie. Policies to improve the educational system and promote credit accessibility to the lower class will work to curb income inequality and stimulate national growth and development,” it added.

From 2010 to 2014, Nigeria’s population grew by 12 per cent while Gross Domestic Product (GDP) rose by 54 per cent during the same period. This implies increased economic well-being and gains for GDP per capita. By 2014, Nigeria’s GDP per capita had grown to $3,203, a 38 per cent increase from 2010’s level of $2310.

Research shows that the minimum yearly income needed to sustain a living that provides the basics in Nigeria stands at $1,016 per year in urban areas (N203,000 per year or N16,900 per month) and $758 per year in rural areas (N151,600 per year or N12,600 per month).

However, 74 per cent of Nigerians live below this income level. Out of this, some 40 per cent live under the poverty line i.e. live on less than $1.25 per day. This translates to N7,500 per month and N91,500 per annum, 49 per cent and 48.4 per cent lower than that required as monthly and annual income respectively.

It added: “The variance between Nigeria’s GDP per capita and the actual average income of the population reflects the problem of income inequality. Income inequality refers to the manner in which income is unequally distributed amongst the population.

“Income inequality in Nigeria is so deeply rooted into the very mechanics of the country that many have become desensitised to the problem and lost sight of its genesis. Firstly, the disparity in income is the result of a segmented labour market (into the formal and informal sector). Such segmentation also has its roots in the ailing public education system. The direct relationship between educational level, skill, and income follows the basic principles of demand and supply; as there is a low supply of skilled workers relative to unskilled workers, the price for skilled workers, i.e. wages, are relatively high.

“The gap is further exacerbated by the unavailability of jobs and the inaccessibility of credit and financing. Thus, those in the lower class have limited to no opportunities to get a part-time job or a loan to help provide the funds needed to finance their educational or vocational training.

“Additionally, demographics can offer an explanation to the income inequality in Nigeria. Urban migration caused by the saturation of commercial activities in metropolitan areas such as Lagos ac- counts for some geographic variation in income distribution. Like- wise, income disparities occur across gender and age with older males (from 34-64 years) being at the benefitting end.

“This is so, primarily because the 34-64 age groups have the advantage of professional experience and presumed expertise and are thus more attractive to employers. Gender inequalities occur because of the profound patriarchal tendencies that exist in our society. 49.1 per cent of Nigeria’s total population are females. Yet, as at 2012, women only made up 14 per cent of those in non-agricultural wage employment.”

In other to bridge the wide inequality gap, the report stressed the need for policy makers to understand the priorities and needs of the lower class, saying that would form an important basis for any policy. Furthermore, it stated that the lower classes are more concerned about daily expenses of food and transport rather than investments into the future.

This is because their pockets cannot afford the luxury of savings and/or investing. For example, a parent would prefer to send their child to sell plantains by the road side and make a daily profit of N600, rather than spend money to give the child an education and forfeit the income the child could earn hawking. Thus, they inadvertently cut short the prospects of the child in a society where income mobility is rigid.

“It is up to the government to develop practical and lasting ways to encourage such parents to let their children go to school. Campaigns to increase general awareness about the value of education and policies to improve financial inclusion and eased micro-finance access to the low income groups will go a long way to help increase the economic prospects and available investment and consumption opportunities for them.

“Further, additional effort should be put into improving the quality of the public educational and vocational system. These will work to raise the average skill levels of the work force. Programs such as the Lagos Eko Secondary Education Project should be formed and implemented on a national scale. The project was aimed at enhancing the learning outcomes of public schools in Lagos State by improving the student performance in maths, English and biology.

“Since its start in 2009, through rigorous teacher training and resource investments, the project has been able to raise the percentage of students who obtained a pass and above in Federal exams from 60 per cent to 86 per cent at the senior secondary level and from 30 per cent to 59 per cent at the junior secondary level.

“Additionally, with the recent removal of petroleum subsidies, the federal government has extra income to spend on social schemes that target the lower classes. In 2015, the government spent N1 trillion ($5 billion) on fuel subsidies, such funds can now be channelled into programs that will work to redistribute income and improve the livelihood for the lower class. Examples include conditional child benefits (that provide financial aid for children who attend school), educational and health fee waivers and food coupons/school feeding programs,” it added.