Nigeria: Making of world’s poverty capital

The Brookings Institution’s report which names Nigeria as the country with the largest pool of poor people in the world is both galling and numbing considering that the country earned N118 trillion from crude oil production between 1961 and 2017. SULAIMON OLANREWAJU looks at the slide of Nigeria to the nadir.

ACCORDING to the Brookings Institution in a report, The Start of a New Poverty Narrative, Nigeria is now home to the highest number of people living in extreme poverty on the globe. The report by the United States of America-based nonprofit public policy organization, states that “At the end of May 2018, our trajectories suggest that Nigeria had about 87 million people in extreme poverty, compared with India’s 73 million. What is more, extreme poverty in Nigeria is growing by six people every minute, while poverty in India continues to fall.”

According to a World Bank report, the number of people living in extreme poverty in India rose from around 200 million in the 1950s to 312 million in 1993-94. The Brookings Institution report shows that over the past 25 years, India has been able to take about 239 million of its citizens out of extreme poverty. Similarly, the World Bank reports that more than 500 million people were lifted out of extreme poverty in China as the country’s poverty rate fell from 88 per cent in 1981 to 6.5 per cent in 2012.

The success of these two countries in taming poverty is to the shame of Nigeria which has been unable to scale down poverty.

Nigeria is a paradox; so wealthy, yet so poor; so endowed, yet so deprived. Nigeria makes more money than many countries of the world but is unfortunately ranked among the poorest because many Nigerians live below the poverty line as they subsist on less than two dollars a day. According to a United Nations report on Nigeria’s Common Country Analysis, youth unemployment is 42 per cent, while the United Nations Education, Scientific and Cultural Organisation (UNESCO) puts the number of out of school children at over 10.5million. Infant mortality rate is 85.8 of 1000 live births, while under-five mortality rate is 137.9 of live births. Malnutrition prevalence, according to the UN, ranges between approximately 46.9 per cent in the South West to 74.3 per cent in North West and North East. So, for most Nigerians, poverty has made life not just boorish but also hellish.

Nigeria, despite its head start ahead of many countries at the onset (we beat France to having a television station in 1959), has since been relegated to the backwaters of under-development with poverty in the country steadily on the rise. Shortly after independence in 1960, according to the Nigerian Bureau of Statistics, about 15 per cent of the population was poor. This rose to 28 per cent in 1980. By 1985, it had risen to 46 per cent, dropping to 43 per cent in 1992. However, by 1996 the poverty incidence had gone up to 66 per cent before climbing further to the current rate of 67 per cent.

The rise in poverty rate in the country has been inversely proportional to her petro-dollar wealth; it seems Nigeria makes more money to get Nigerians poorer; the richer the country gets, the poorer the citizens become. This is why the country steadily slid from relative to absolute poverty. Relative poverty is a measure of income inequality. It is measured as the percentage of population with income less than a fixed proportion of median income. Absolute poverty, however, is “a condition characterised by severe deprivation of basic human needs, including food, safe drinking water, sanitation facilities, health, shelter, education and information. It depends not only on income but also on access to services.”

 

Causes of poverty

Two international organisations have given apt definitions of poverty. According to the United Nations, poverty, fundamentally, is a denial of choices and opportunities, a violation of human dignity. “It means lack of basic capacity to participate effectively in society. It means not having enough to feed and clothe a family, not having a school or clinic to go to; not having the land on which to grow one’s food or a job to earn one’s living, not having access to credit.”

The World Bank describes poverty as pronounced deprivation in well-being in a multi-dimensional manner. “It includes low incomes and the inability to acquire the basic goods and services necessary for survival with dignity. Poverty also encompasses low levels of health and education, poor access to clean water and sanitation, inadequate physical security, lack of voice, and insufficient capacity and opportunity to better one’s life.”

The distillation from the two definitions is that poverty starts with exclusion and results in deprivation. The poor are so because they have been excluded from opportunities to earn decent income, enjoy health care facilities and access educational facilities. It is this exclusion that leads to a debilitating lifestyle that underpins poverty.

The exclusion that causes poverty is precipitated by a number of factors. One of these is official corruption.

 

Official corruption

Every year, funds are voted to address certain needs in the country but such money is hardly channelled to the intended projects but is instead diverted to personal use of the state officials in charge of such projects. An example is the issue of electricity. Between 1999 and 2007, about $10billion was voted for electricity generation improvement but the bulk of the money was not used for what it was voted for. This has two major effects on the populace; the first is that the commonwealth of the people had been converted to personal use of a few. The import of this is that while a handful of the people get stupendously rich, the vast majority is discomfited; the gain of a few becomes the loss of the majority.

Then, the opportunity cost of the corrupt enrichment of the state officials that failed to use the money judiciously is the pain of the populace as a result of the failure to get facilities for which money was voted.

The inability of the state to ensure regular electricity supply has been partly responsible for the growing poverty in the country. The cost of doing business in the country has hit the roof with the effect that many multi-national companies have relocated to other countries. The consequence of this is that a number of Nigerians that would have been employed have lost that opportunity to nationals of other countries. Then, many cottage industries that would have sprouted had electricity supply been regular have remained mere dreams and business plans. Again, this has reduced the number of people that could be employed. It is this non-employment of able-bodied and skilled people that results in exclusion that produces poverty. Most of those who are unemployed are skilled but corruption has excluded them from employment.

Commenting on the nexus between corruption and poverty, Dr Marshal Owolabi, a Texas, United States of America-based economist, said the strongest hindrance to poverty reduction in the country is corruption.

According to him, “Take the Sagamu-Benin express road for instance. We all know how many times money has been budgeted for the rehabilitation of that road. For a moment, take your mind away from the money but look at the number of people who have lost their lives on that road. Those are the lucky ones. Those who did not die are the unlucky ones because for many of them and their families, especially those who are their families’ bread winners, it is a plunge into poverty. If a self-employed man is involved in an accident and has to spend six months or one year in the hospital, it means for that period, there is no income for him despite the fact that he has to keep spending money. Let’s not forget the cause; it is because some people stole money meant for the repair of that road on which the accident occurred.”

Pushing the argument further, Owolabi said if those who are supposed to ensure compliance with standards fail to do this and fake drugs get into the country and people buy the drugs and rather than get healed, get their cases complicated, it means they will be unable to earn income during their period of illness and this will affect their economic well being. “After losing income for about one year, many people are unable to get out of the poverty ring because over the period they would have amassed a lot of debts which would cripple them economically,” the economist said.

His submission, “wherever there is corruption, you find poverty because corruption stalls the proper distribution of wealth, corruption engenders inequality, which is the foundation for poverty.”

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Unfavourable government policies

Another cause of poverty is unfavourable government policies. In Nigeria, as in many other countries, the economy is subjected to the whims and caprices of the government. A single government policy can either lift millions out of poverty or sink them deeper into poverty. Nigeria slid into recession in 2016 principally because of the government’s sluggishness in reacting to the economic realities of the time. As the nation’s earnings from petroleum sales dwindled, there was so much pressure on the naira on the foreign exchange market. But rather than respond quickly, the government was reluctant to depreciate the naira against the dollar thus allowing profiteers to take advantage of the situation as the gap between the official exchange rate and the informal market rate of the naira was as high as N100. This created a room for unscrupulous people to engage in underhand dealings which left the economy prostrate and the people poorer as round-tripping became the order of the day. This resulted in pushing up the inflation rate from the 2015 level of nine per cent to about 18 per cent. The country has yet to recover fully from the exchange rate-precipitated inflation.

The effect of the inflation is huge on the people as the value of disposable income was reduced by as much as 50 per cent in many cases. Given that income and wages have not been reviewed, the government’s delayed action in addressing the exchange rate of the naira pushed quite a sizeable number of Nigerians into poverty.

Another policy of the current government that is fuelling poverty is its penchant for borrowing in the time of prosperity. Despite the prices of crude oil rallying over the last 18 months, Nigeria has continued to borrow at an unprecedented rate. It appears that the more money the country makes from crude oil sales, the higher the desire to borrow. Crude oil price hovered around $30 per barrel in 2015 but is now around $80 per barrel, yet between 2015 and the current year, the country’s debt profile has risen by over N10 trillion. Consequently, the allocation to debt servicing has also been on the increase. In 2016 budget, N1.48trillion was allocated to debt servicing. In 2017, it was N1.84trillion and in 2018, it went up to N2.014trillion.

According to Vitor Gaspar, International Monetary Fund’s Director of Fiscal Affairs Department, while speaking at the World Bank/ International Monetary Fund Spring Meetings in April 2017, Nigeria spends 66 per cent of its tax revenue on debt servicing. Former governor of the Central Bank of Nigeria (CBN), who is currently the Emir of Kano, Alhaji Muhammadu Sanusi, also said the nation expends 66 per cent of its total revenue on debt servicing, leaving it with just 34 per cent for both capital and recurrent expenditure. The implication of this is that unless there is a deliberate decision to stem the tide, it will get to a point that the country would need to borrow to pay its debts and that would escalate the people’s poverty.

 

Poor investment in education

Poor investment in education also escalates poverty. The 2017 Ibrahim Index of African Governance scored Nigeria 43.7 per cent in the area of education. This is less than the continental average put at 48.3 per cent. The 2011 Little Data Book on Africa, compiled by the World Bank, puts gross primary school enrolment vis-a-vis relevant age group at 93.1 per cent, but puts gross secondary school enrolment (percentage of relevant age group) at 30.5 per cent. The implication of this is that while almost all children of primary school age are enrolled in primary school, only 30 per cent of them proceeds to secondary school. The number of out of school children in the country is put at over 10.5million.

The 2010 Global Monitoring Report of the United Nations Education, Scientific and Cultural Organisation (UNESCO) has this to say about the nation’s state of education, “Sub-Saharan Africa has registered remarkable progress since 1999 in reducing its out-of-school population by nearly 13 million, down to 32 million in 2007. Yet the deficit remains large: one-quarter of the region’s primary school age children were out of school in 2007, and the region accounted for nearly 45 per cent of the global out-of-school population. Nigeria alone represented over 10 per cent of the global total.”

But that was not the case in the 1960s. Then, investment in education was high, especially as the nation’s leadership saw education as the key to economic, technological and intellectual development of the young country. The mantra then was, “Show the light, and the people will find the way.” Then, there was massive investment in education and this reflected in the state of the schools which buoyed the standard of the institutions as they competed favourably with world-class institutions. The populace responded by enrolling nearly every school age child in school. The transition rate from primary to secondary was high; the same for from secondary to the tertiary institutions. This continued into the 1970s.

But then the trend changed, fund allocation to the sector reduced, a development that led to a decline in the infrastructure in schools as well as teachers being owed salaries and they embarking on endless industrial actions. This affected the enthusiasm of pupils and their parents, especially as many parents had withdrawn their children from farms to go to school in the first place. Many of the children were withdrawn from school and either returned to farms or were apprenticed to learn a trade. Since then, convincing some parents to allow their children to return to school has been herculean.

Speaking about the negative effect of illiteracy on a country, Koïchiro Matsuura, former Director General of UNESCO, said “An illiterate person is simply more vulnerable to ill-health, and less likely to seek medical help for themselves, their family or their community. Literacy is a powerful yet too often overlooked remedy to health threats, with the potential to promote better nutrition, disease prevention and treatment.”

 

Inability to access credit

The difficulty associated with accessing credit in the country is also a factor in the spread of poverty. Despite several attempts by the government to increase access of the poor to credit, it has been quite difficult to get this done as there are so many institutional roadblocks that hinder the poor from accessing credit.

The Federal Government, through the Central bank of Nigeria (CBN), came up with Agricultural Credit Guarantee Scheme Fund, Agricultural Credit Support Scheme, Commercial Agriculture Credit Scheme and Anchor Borrowers Scheme to ease farmers’ access to bank credits in recognition of the fact that agriculture is a major contributor to the country’s GDP. But farmers have been having a difficult time accessing the funds because of the conditions attached to borrowing.

According to Alhaji Abiodun Oyenekan, President, Lagos State Federated FADAMA Community Association, smallholders cannot take advantage of the opportunities because they can rarely meet the rigid collateral requirements or pay back the loan within the short-term lending periods.

Similarly, the Federal Government, through the CBN, instituted the N200 billion Small and Medium Enterprises Credit Guarantee Scheme (SMECGS) to promote access to credit by small and medium enterprises. The intention was that if these categories of business had access to credit, they would become active commercially and be positioned to create job opportunities for a number of Nigerians.

But just as is the case with farmers, so it is with small scale entrepreneurs, accessing the funds is a nightmare because of the conditions attached.

Idris Olabode Badiru, in a publication of the International Food Policy Research Institute entitled Review of Small Farmers Access to Agricultural Credit in Nigeria, posited that only 18 per cent of small scale farmers have access to financial services.

He added that, “small-scale farmers have relatively more access to informal and semiformal credit institutions than to formal credit institutions, in spite of the higher volume of credit at the disposal of formal institutions. In addition, the high repayment rate of loans recorded by informal and semiformal institutions could indicate that the loans are granted at affordable rates to the small-scale farmers and that subsidisation may not be necessary. It was also found that access to credit is likely to help improve the well-being of the beneficiaries.”

So, a combination of these factors as well as others have distanced most Nigerians from income earning opportunities and as a result they are subjected to sub-standard existence as many battle with common diseases, live in slums, earn income that cannot ensure decent living even as many make a living out of begging for alms, situations occasioned by poverty.

 

Government’s anti-poverty efforts

The Nigerian government has consistently reiterated its commitment to poverty reduction in the country. The first of the government efforts to scale down poverty in the country was Operation Feed the Nation (OFN), which was introduced by General Olusegun Obasanjo in 1976. The focus of the programme was to encourage Nigerians to embrace agriculture for the purpose of solving two poverty-related problems; malnutrition and unemployment.

OFN was replaced with Green Revolution which was introduced by former President Shehu Shagari in 1980. The focus of this programme was similar to its predecessor’s.

The first administration to address access to credit by the poor as a way of alleviating their poverty was that of General Ibrahim Babangida. The administration started the now defunct People’s Bank, which had a mandate to provide funding for entrepreneurs that could not access funds in conventional banking institutions. It also introduced community banks, which were meant to assist rural and poor people. Babangida’s administration also introduced the Directorate of Food, Roads and Rural infrastructure (DIFRRI). This outfit was meant to open up rural areas while providing them with basic amenities for the purpose of increasing commercial activities in the areas. It was also the administration that started the National Directorate of Employment (NDE) with the mandate to develop programmes that would combat mass unemployment.

General Sani Abacha, who became Head of State in 1993, established the Family Economic Advancement Programme (FEAP) as an agency to fight poverty in the country. The modus operandi of the agency was to disburse loans to families through cooperative societies.

General Obasanjo, in his second coming as the nation’s head, introduced the National Poverty Eradication Programme (NAPEP) to coordinate all anti-poverty programmes in the country from the local government to the federal level.

Former President Goodluck Jonathan also demonstrated his willingness to fight poverty by identifying with the United Nations MDGs. The UN in Year 2000 set 2015 as the target year for developing countries to record some progress in certain developmental areas with a view to scaling down poverty. The administration appointed a Senior Special Assistant to the President on MDGs to monitor poverty reduction activities in the country.

As a way of scaling down poverty in Nigeria, President Muhammadu Buhari, on assumption of office, established the National Social Investment Programme, with four components viz; the N-Power, to cater for unemployed graduates through training and employment provision; the Home Grown School Feeding Programme (HGSFP), targeted at feeding school children; Conditional Cash Transfer (CCT), a social safety net that gives N5,000 monthly to the poorest and vulnerable in the society; and Government Enterprises Entrepreneurship Programme (GEEP), through which the government promotes financial inclusion and access to credit for 1.6 million traders, artisans, cooperatives, youth and farmers.

While there is no doubt that some progress has been recorded by the government in its poverty alleviation activities, the fact that independent international organisations say that 67 per cent of the country’s population live below the poverty line casts a pall on the efforts of the government. What the verdict portrays is that the efforts of the government have not yielded encouraging results despite the trillions of naira sunk into the programmes.

Four reasons are probably responsible for the unimpressive results of the anti-poverty programmes. The first is that the programmes were politicised. The intention behind most of the programmes was not to extricate the suffering masses from their poverty and anguish but to make a political statement. OFN and Green Revolution were similar in concept and execution, therefore there was no real reason to scrap the former and replace it with the latter. So, rather than strengthening the programme to make it more relevant to the people, it was scrapped and a lot of money went into starting the same programme under a new name.

In the same vein, the mission of the FEAP was not different from that of the People’s Bank; it was to make credit available to the excluded. So, there was no real reason for FEAP. What was required was for People’s Bank to be strengthened to make it deliver more on its mandate.

The second reason for the seeming ineffectiveness of the poverty alleviation programmes is corruption. Because of the pervasiveness of corruption in the country, operatives of the poverty eradication agencies often work at cross-purposes with the objective of the agencies by converting funds meant for the masses to personal use. So, as a result of corruption, rather than the poverty reduction programmes reducing the number of the poor, they increase the number of the poor.

The third factor is the failure of government to institute a system of assessing the success of the programmes. There is no feedback mechanism by which the government can hear directly from the poor on how effective or otherwise the programmes are. By the time it gets to the government that the programme is off target, it will be too late to do anything about it.

The last reason is that the efforts are usually too little to make any meaningful impact. According to Mrs Maryam Uwais, Special Adviser to President Muhammadu Buhari on National Social Investment Programme, out of the 80 million poor people identified by the government, only about 455,857 (0.57 per cent) have been captured in the National Social Register (NSP) being used by the Federal Government for its National Cash Transfer Programme. Not even all those captured for the cash transfer programme get the monthly stipend of N5000.00; just 297,973 (0.37 per cent) of the identified poor get the monthly support of the government. So, scaling down poverty in Nigeria has been arduous because the government is not really committed to it.

So, until poverty alleviation programmes are divorced from politics and corruption, and government demonstrates sincere intention to defeat poverty by tackling with all its might, poverty alleviation programmes will be mere motion without movement.