Poverty reduction and the confluence of insecurity and economic contraction

The combined effects of low oil prices, a weakening local currency and the continued spread of COVID-19 have begun to turn out big negative growth numbers around the world. Nigeria grew backwards at 6.1 percent in the second quarter, with potential to worsen in the third. The only mitigant to the sadness in this bad news is that we are still better than many. Both the United Kingdom (UK) and the United States (US) are in worse growth trajectories, having recorded a higher decline in their economies. That is probably the end of the comparison, as Nigeria is in a far worse situation in terms of joblessness and its attendant consequences.

We now have a 21.7 percent unemployment rate. It means that over 27.1 million of us who are not only willing and able to work but are actively looking to get hired, are not finding any openings. In more caring societies, the US, people in that predicament get paid something called Unemployment Benefit, but not here. Here we assess them for personal “no income tax”. The tax authorities both at the national and subnational levels are outdoing one another for the race to the highest Internally Generated Revenue (IGR) collector.

We may recall that the president had announced, during his second term inauguration, that Nigeria will start a new programme of lifting 100 million Nigerians out of poverty, within a decade. This policy was well-publicised, analysed and sufficiently x-rayed in the context of the country’s current economic conditions. It was widely welcomed despite the debate as to its practicability among some analysts. The last time I checked, bringing that number of us out of poverty is still a cardinal policy of the Nigerian government for the next decade. According to the president, it was his conviction, and I believe it still is, that this objective will be achieved.

In his words, “by devoting our efforts towards human capital development, efficient management of our resources, greater financial inclusion, and the transformation of the agricultural sector to ensure food security are crucial to poverty eradication”. I could not agree less with the president. In fact, one could actually go further to say that doing those things the president outlined, and doing them diligently and consistently over that time frame, would not only catapult 100 million Nigerians out of poverty but also transform the country as a whole, to an economically stable modern state.

Some critics did cast doubt on the plan, terming it over-ambitious and logically doubtful. Many such doubts were premised on the global economic conditions that have adversely impacted national revenues, and hence, the capacity to invest in the requisite Social Overhead Capital entailed in the plan. Others agree that it is doable but that Nigeria is not mentally and structurally ready to stay the course of the discipline, required for a plan as serious as that. I believe that the right to hold opinions is fundamental to the effective functioning of democratic environments. It is therefore needless to question the capacity of those that think the programme is unachievable.

We now have a 21.7 percent unemployment rate. It means that over 27.1 million of us who are not only willing and able to work but are actively looking to get hired, are not finding any openings. In more caring societies, US, people in that predicament get paid something called Unemployment Benefit, but not here

What may be needful, in my view, is to try to understand the import or presupposition of each of the tactical moves or steps that the president had outlined would lead us to achieve the plan. The plan may be an ambitious one but certainly not impossible to attain. Besides, the absence of ambition is the stagnation and southward drift. Accordingly, I would make some propositions on the route, which government plans to travel to reach this critical objective, or what I could term the tactics of the plan.

For starters, Nigeria is now officially in a state of war with several terrorists, who want to overrun the country, and establish a regressive political system, or dismember it, and carve out a territory for themselves. During wars, emergency powers are rampantly applied and effective non-military planning is supplanted by adhocism. In that regard, getting things done is often an important issue; not getting it done in a properly planned way. Therefore, consistently following through the job creation strategy may suffer as the war proceeds. Nigeria has a large population of young energetic people, who could work really hard, under appropriate incentives. It also has natural resources, beyond oil, that could be harnessed to create the jobs needed to engage the teeming mass of unemployed people.

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Unfortunately, job creation in conflict-affected countries, of which Nigeria has unconsciously become a member, is not as simple as it may appear. An important question that needs to be asked, therefore, is where the jobs will come from, even if the tactics are faithfully implemented. The OECD in its 2015 report said that the fifty countries on the its “Fragile States” list account for 43 percent of people living on less than $1.25 per day – below the poverty line. It further stated that this number has the potential to reach 62 percent by the year 2030. It has also been reported that more than a billion people live in countries affected by fragility and conflict. Finding ways to balance the impacts of the job creation efforts of the government and the job destruction impact of war is a challenge.

In countries where governments are bugged down by their involvement with activities that ought to be fully privatised, the public sector may be the largest employer of labour. However, it is now obvious that such government involvement in activities best suited for the private sector produces suboptimal results and therefore has become a vanishing model. Governments do not produce the kind of quantum job growth that is needed to significantly slow down unemployment in conflict areas. Besides, continual displacement of the population and destruction of livelihoods, also reduces the impact of any job creation programmes, as more and more people become refugees.

Small businesses not only provide the rapid growth of jobs in an economy, they actually do more than job creation. They provide goods and services that also serve as inputs to the production process, thereby spurring more jobs. Ordinarily, the best strategy should be to promote rapid expansion in the small business sector but these small businesses are always short and in need of capital. Finding creative ways to improve the capital bases of small business should be a cardinal job creation policy.

This is where a new challenge arises – the meaning of small business. The Nigerian economy is largely informal – driven by MSMEs, which are defined respectively as Microenterprises, when they have less than 10 Staff and below N5m in assets, excluding land and building; Small Enterprises when they employ less than 50 Staff and own less than N50 million in assets and Medium Enterprises when they employ less than 100 Staff and own less than N500 million worth of assets excluding land and building. This definition is now very unstable, as currency value dwindles.

The exchange rate situation has changed these definitions and made it very hard to easily classify businesses. What kind of business can five million naira start today? It is at best, a briefcase business that will have no offices and such. Perhaps, the virtual new normal may reduce costs in brick and mortar but devaluation has redefined the capital requirement for each business category. Small businesses have become microenterprises while medium ones have become small given the volume of naira needed to run them. We are probably looking at the need to redefine these categories for effective policy application.