• Friday, March 29, 2024
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How Nigeria can stem its increasing poverty rate – Kale

economy

Disturbed by the increasing number of Nigerians living on less than one dollar a day, Yemi Kale, statistician general of the Federation and CEO of National Bureau of Statistics (NBS) has recommended three solutions to solving Nigeria’s high poverty rate.

Africa’s largest economy has some of the worst prosperity outcomes both globally and among peers in the continent, and that has over time inhibited economic growth of the country. For instance, the country overtook India in extreme poverty ranking with about six people entering the poverty trap every minute, according to a 2018 report by Brookings Institute.

Some 29.4 million persons are also jobless as at Q3 2018 based on official data, one of the highest in the continent.

In a paper titled ‘Innovative Economic Solutions to Unlock Mass Poverty,’ seen by BusinessDay, Kale recommends addressing unemployment, increased formalisation of the formal sector and designing of appropriate tax systems to extract revenue from economic activities, as some of the policy routes Nigeria must take if it wants to tackle poverty.

Kale shows that Nigeria has the lowest poverty line and lowest Gross Domestic Product (GDP) per capita when compared with economic rival nations like South Africa and Egypt, despite having the biggest economy in the continent.

Based on his calculation, Nigeria has a poverty line of N137,430 per annum, and when divided by 365 days it equates $0.97 per day, a disappointing number when placed side by side with South Africa’s N266,495 ($1.88 per day) and Egypt’s N215,864 ($1.53 per day).

But despite a poverty level of $0.97 per day, the lowest among the three aforementioned nations, some 40 percent of its population currently live below the poverty line.

This is only better to some extent than SA’s 49.2 percent, but disheartening when juxtaposed with the 32.5 percent of Egyptians living below the poverty line.

Similarly, the country’s GDP per capita at $2,222 is nowhere close to SA’s GDP per capita of $6,130 and that of Egypt’s $3,047, according to Kale.

A lower GDP compared with other nations, puts Nigerian as having a lower standard of living, and one that is struggling to supply its inhabitants with everything they need, elementary knowledge in economics.

Nigerian President Muhammadu Buhari, who secured another 4 years to rule after beating his main opponent Atiku Abubakar in the 2019 elections, has always spoken of lifting an average 10 million Nigerians annually through a 10-year period by creating enough jobs for its burgeoning youthful population.

But this has largely been a mere stale campaign promise for Nigerians who have seen more of its populace being drowned into poverty rather than being prosperous.

The country now holds the mantle of being the poverty capital of the world, overtaking India, reports from Brooklyn Institution shows.

Kale, whose office has been the major custodian of data, explains that the contribution of education and family size to poverty reduction represent an important opportunity for policy makers to fast track poverty reduction.

Taking a clue from the 2019 National Living Standard Survey (NLSS), which the state funded agency recently conducted in collaboration with the World Bank, Kale notes that large households and agriculture are key risk factors determinant of poverty rate.

According to Kale, larger household sizes are associated with higher poverty rates while a higher education is associated with lower poverty rates.

In the paper, the statistician general observes that Nigerians at the poverty line spend almost three times as much on food as they do on non-food essential items.

This was significantly different from their counterparts in South Africa and Egypt – an indication of agricultural productivity, and reliance on food imports and the impact on prices, he states.

Egypt, with the lowest poverty rate, spends significantly less on food when compared to both Nigeria and South Africa, indicating the importance of local agricultural productivity, he notes.

In the report, he cites the case of clear regional disparities in the distribution of poverty across the nation with Sokoto, Taraba, Jigawa, Ebonyi and Adamawa having 87.73, 87.72, 87.02, 79.06 and 75.41 percent, respectively, of population living below the poverty line, compared to only 4.5, 6.02, 8.52, 9.32 and 9.82 percent of the population in Lagos, Delta, Osun, Ogun and Oyo, respectively.

In terms of income inequality going by Gini Coefficient, a metric that tries to show the spread between the have and the have not, the paper puts the national Gini Coefficient at 35.1 percent, evenly distributed across states.

It also cites Plateau as having the highest income inequality in the country with more than half of its population living below the poverty rate. Kaduna was ranked second states with the highest incidence of income inequality,

After successfully highlighting key solutions that can help in salvaging the country’s poverty incidence, Kale, who is known for high economic intellect driven by data, further gives insight into ways the key recommendations can be achieved.

Addressing unemployment

According to Kale, unemployment and poverty appear closely related; however, the strategies in solving unemployment will differ among states.

In states facing unemployment there is a need to stimulate demand for labour and skills relevant to the states’ specific dominant economic activities.

In states facing underemployment, Kale explains that strategies could aim to improve output per worker, e.g. by improving access to mechanised agricultural production.

Lastly, he points out that attracting investments into the state, through ease of doing business initiatives, could also play a key role in boosting employment and quality of employment.

Increasing sector formalisation

Under the sector formalisation as a way of reducing poverty, he makes some striking observation in his four lines of thought:

First is the fact that industrial activity appears more common among low poverty states. Secondly, he notes the fact that agriculture and services are more dominant in states with higher poverty. Thirdly, he recommends formalising the informal sector, and lastly, a higher value addition by developing value chains.

Taxing to foster development

He questions the fiscal capacity of Nigerian states, noting that the extent to which states can generate revenue given their taxation system could go a long way in tackling the country’s poverty incidence.

The lower poverty states appear to have greater ability to generate taxes from economic activity than high poverty states, he explains.

Furthermore, he stresses on the importance of designing an appropriate taxation system to extract revenue from economic activities, boost internally generated revenue, which are then applied to poverty reducing development projects.