Antidote to Rising Poverty in Nigeria

There is need for comprehensive reforms to create opportunities for all citizens so as to drastically reduce the level of inequality as well as the number of families who live in poverty, writes Obinna Chima

Rising poverty in any country is harmful to its citizens. As a reflection of how important poverty eradication is, the United Nations (UN) made it the first item among its 17 Sustainable Development Goals (SDGs).

Eradicating extreme poverty for all people everywhere by 2030 is a pivotal goal of the 2030 Agenda for Sustainable Development. According to the UN, between 2015 and 2018, global poverty continued its historical decline, with the poverty rate falling from 10.1 per cent in 2015 to 8.6 per cent in 2018. However, the global body revealed that owing to the COVID-19 pandemic, the global poverty rate increased sharply from 8.3 per cent in 2019 to 9.2 per cent in 2020, representing the first increase in extreme poverty since 1998 and the largest increase since 1990 and setting back poverty reduction by about three years. This was further exacerbated by rising inflation and the impacts of the war in Ukraine and it has been estimated that these combined crises would lead to an additional 75 million–95 million people living in extreme poverty in 2022, compared with pre-pandemic projections.

Regrettable in Nigeria, despite the President Muhammadu Buhari-led administration’s target of lifting 100 million Nigerians out of poverty over the next 10 years, a recent report showed that the reverse was the case. Specifically, the report by the National Bureau of Statistics (NBS) revealed that no fewer than 133 million Nigerians, representing 63 per cent of the population are currently living in multi-dimensional poverty. Of the total, 105.98 million poor Nigerians are located in rural areas compared to 16.97 million in urban areas.

According to the Nigeria Multidimensional Poverty Index (MPI) 2022 Survey, there are high deprivations in sanitation, time to healthcare, food insecurity, and housing. Also, poor people were said to experience over one-quarter of all possible deprivations.

Moreover, both the incidence and intensity of poverty at 62.9 per cent and 40.9 per cent respectively exceeded the 26 per cent poverty cut-off threshold. The report stated that over half of the 200 million population who are multi-dimensionally poor cook with dung, wood, or charcoal, rather than clean energy.

According to the report, multidimensional poverty is higher in rural areas where 72 per cent of the people are poor compared to 42 per cent in urban areas. It stated that about 70 per cent of Nigerians live in rural areas, yet these areas are home to 80 per cent of poor people. The report pointed out that the north accounted for 65 per cent or 86 million poor Nigerians while 35 per cent or about 47 million people living in poverty reside in the south. The incidence of multidimensional poverty was high in Sokoto State which accounted for 96 per cent of poor Nigerians and the lowest incidence of 27 per cent was recorded in Ondo. In terms of the proportion of poverty and its intensity, the poorest states included Sokoto, Bayelsa, Jigawa, Kebbi, Gombe, and Yobe.

“But we cannot say for sure which of these is the poorest because statistically, their confidence intervals or the range within which the true value falls considering the sample overlap,” the report noted.

The report, among other things, stated that two-thirds of children aged 0-17 are poor and accounted for 65 per cent compared to 58.7 per cent of adults, adding that “This gives rise to the sobering reality that over half of all poor people are children.”

However, in order to reverse this trend, a new report authored by a former Deputy Governor of the Central Bank of Nigeria (CBN), Prof. Kingsley Moghalu, and Mr. Damian Kalu Ude, have among other prescriptions, recommended that the federal government should can set aside between N5 trillion and N7 trillion yearly to fund the operation of a thorough, well-managed social security system, as well as a comparable, separate allocation for education, healthcare, water, and sanitation, in order to address rising poverty in the country.

The report, which was released by the Moghalu-led Institute for Governance and Economic Transformation (IGET) titled, “Nigeria’s Poverty Trap and How to End It,” recently, actually projected that more than 194.4 million Nigerians, about 90 per cent of Nigeria’s population, are living in poverty while an estimated 95 million of them are caught up in extreme poverty. It added that more than 60 per cent of the poorest people in Nigeria are women.

“In order to save money in other areas of government, infrastructure projects should be financed mostly through public-private partnerships, with the exception of rural infrastructure. The cost of governance should be reduced,” it stated.

It declared unequivocally that, “poverty is a significant strategic threat to Nigeria’s future. An estimated 95 million Nigerians live in extreme poverty, with more at risk from deprivation and loss of purchasing power from inflation and a stressed macro-economy, and the country’s population is growing rapidly.”

It added that “at current trends, Nigeria will not be able to end extreme poverty for 35 million people by 2025, or for 100 million Nigerians within the next 10 years, as indicated in its National Development Plan and other policy pronouncements by the government.”

The report blamed the rising poverty rate in the country squarely on the absence of effective nationhood and governance, which it identified as the main factor contributing to Nigeria’s poverty trap.

It added: “This generalised term is used in this research to define a number of the characteristics of the Nigerian state. These include the political leadership elite’s lack of genuine devotion to the state and its population, a capture of the state by special interests, the political elite’s extreme corruption, and the lack of a wide elite agreement on development as a top priority of public administration.”

Moghalu and Ude stated that the goal of the report was to, “understand the Nigerian poverty trap, its dimensions, effects, and potential solutions while also offering directional policy recommendations.”

They also stated that the country required, “a new elite development consensus on development that cuts through partisan political and other divides, as well as a unity of purpose that is focused on the human development of its 216 million citizens, in order to start making meaningful progress in the eradication of poverty.”

This consensus, according to the report, should be focused on creating a broadly prosperous society that would entail lifting millions of Nigerians out of poverty and moving them into the middle class through wealth creation.

The report added that a key necessity for the achievement of this agenda, “is philosophical clarity regarding the roles of the state and the market in reducing poverty.”

Moghalu and Ude stated in the report that the, “Nigerian poverty is notable in particular because it has been escalating amid a sizable, expanding economy that has largely excluded a vast majority of the population.

“Northern Nigeria continues to be the region with the highest concentration of poverty in Nigeria, whether assessed by a state’s multidimensional or monetary poverty headcount. In rural places, poverty is more pervasive.”

They suggested that efforts to eradicate poverty should include increased and carefully targeted investments in healthcare and education, creating an environment that encourages the creation of jobs in the private sector, and bold fiscal reforms to increase government revenue through effective taxation and the elimination of wasteful fuel subsidies while mitigating the potential effects of subsidy removal on already poor citizens as well as other macroeconomic reforms like exchange rate adjustments.

The report added: “Abolition of the Land Use Act, civil service and security reforms to improve state capacity and gender empowerment, intensified family planning education and services, and resolution of the conflicts (or ‘silent wars’) in various parts of Nigeria that have caused and exacerbated poverty through internal displacement and decreased food production are all structural changes necessary to enable millions of Nigerians to escape the poverty trap.”

It also recommended targeted investments to prevent or manage disasters brought on by climate change, such as floods and droughts as well as revamping the micro finance banking system and implementing hourly pay jobs. 

The report noted that the social protection system in Nigeria was insufficient, ineffective, and therefore mainly ineffectual to reduce poverty.

It called for rethinking the social protection measures, adding that, “it is necessary to have a social protection system that is well organised, expertly planned, and supported by national law.”

“Implementing these measures while incorporating structural reforms will increase the chances of controlling the rise of poverty as a ‘growth industry.’”

The authors of the report advocated the implementation of a social security program for five million Nigerians that are 65 years and above.

On its part, the World Bank advised Nigeria to urgently strengthen its fiscal management, create a unified, stable market-based exchange rate and reiterated the need for the country to phase out what it described as, “its costly, regressive fuel subsidy,” so as to free up resources to tackle poverty.

These, the Bank’s Group President, David Malpass, noted would lay the groundwork for the increases in public revenues and spending needed to improve development outcomes.

“Decisive moves would significantly improve the business enabling environment in Nigeria, attract foreign direct investment, and reduce inflation. The World Bank is ready to increase support to Nigeria as it designs and implements these critical reforms,” he added.

The multilateral institution observed that for years, a large share of Nigeria’s resources had financed inefficient and regressive subsidies for petrol, electricity, and foreign exchange, adding that not all the subsidies were accounted for in the budget, which makes them difficult to track and scrutinise.

The bank, however, noted that available data suggested that subsidies, which accounted for more than the amount spent on education, health, and social protection in 2021, benefit primarily wealthy households.

To World Bank Nigeria Country Director, Shubham Chaudhuri, Nigeria was at a critical historical juncture and has a choice to make.

He said: “A child born in Nigeria today will be only 36 per cent as productive when she grows up as she could be if she had access to effective public education and health services, and has a life expectancy of only 55 years.

“These stark indicators illustrate the urgency for action by Nigeria’s policymakers to improve the macroeconomic and fiscal framework, so as to sustainably enhance the quality of spending and public services at federal and state levels.”

From the foregoing, there is need for comprehensive reforms to create opportunities for all citizens in the country so as to drastically reduce the level of inequality as well as the number of families who live in poverty. Additionally, the federal and state governments must design deliberate strategies targeted at reducing the number of children who are born or fall into poverty and genuinely implement same.