Only last week, the World Poverty Clock released a report that painted a glim picture of the increasing poverty trend in the country. The report notes that Nigeria has already overtaken India as the country with the highest number of extremely poor people, despite the fact that India has a population of 1.324 billion people while Nigeria has a population of just about 200 million people.
According to the report, the number of Nigerians living in extreme poverty crossed the 87 million mark in 2018, surpassing India’s number of extremely poor at 73 million. This means that almost one of out every two persons living in the country is now extremely poor.
The World Bank had in 2015 fixed the threshold of the extremely poor as those living on less than US$1.90 a day. This means that anyone with an income below this amount is extremely poor. At US$1.90 per day, this comes to US$693.5 a year, which is an equivalent of N249,660 a year based on an exchange rate of N360 to the US$1.00 (the average rate in the Investors and Exporters (I&E) window used for commercial transactions involving currency exchange).
On a monthly basis, this comes to an income of N20,805. This simply means anyone on a salary of N20,805 per month, which is slightly above the minimum wage is extremely poor. Another way of saying it is that anyone on a minimum wage in the country is extremely poor.
It is not clear how many Nigerians are on a minimum wage or how many people earn below this amount on a monthly basis. It is difficult to say. But many civil servants in the public service in states across the federation do not even earn the minimum wage. In the wider informal sector, this is a bit more difficult to determine. But we could use withdrawals from ATMs, which is widely used across the country as a proxy to show people’s earning power. This is a good proxy since those who use ATMs are both in the formal and informal sector of the economy and Nigeria is still a highly cash based society.
Data from the NIBSS website showed that as at March 2018, the total number of active bank customers stood at 65 million and together they operated 108.3 million bank accounts of which only 70 million bank accounts were active. The number of accounts with unique BVNs was 45.1 million, which is about half of Nigeria’s labour force population of about 85.1 million. Most bank customers use ATMs because it is more convenient especially for small withdrawals. These withdrawals usually indicate the earning power of individuals since people with higher income tend to make higher single withdrawals than those with lower incomes. So average cash withdrawals from an ATM is a good indicator of the average earning and spending power of the majority of a country’s earning population.
The NIBSS data shows that in the three months ending March 2018, total value of transactions on ATMs across the country stood at N1.57 trillion. The total transaction volume in the same period stood at 212.37 million, which brings average value per transaction in the period to N7,393. This low single withdrawal is a sign of the low earning power of Nigerians. It is therefore not surprising that most banks have pegged maximum withdrawal from ATMs at N10,000 per transaction. Some unconfirmed figures put 90 percent of withdrawals as falling below this amount.
In the same period, using another indicator of purchasing power, POS transactions, average value per purchase stood at N8,863. This is about US$25, just about the one third global average of US$80 per transaction on Mastercard and Visacard, two of the popular cards used in Nigeria. But, then many Nigerians still transact in cash, so withdrawals from ATMs is still a better indicator of people’s earning power.
But there are other indicators that also show that ‘extreme poverty’ in the country is real. The latest unemployment figures released by the National Bureau of Statistics (NBS) put the unemployment rate at 18.8 percent as at the third quarter of 2017. The NBS report shows that unemployment rate increased consistently from 14.2 percent in the third quarter of 2016. In absolute numbers, the total number of unemployed people was 15.9 million as at the third quarter of 2017.
Within the same period, another 18 million people were classified as underemployed. Combined, both unemployed and underemployed were 40 percent of the country’s labour force which the NBS put at 85.1 million. This means that almost 1 out of 2 people in the labour force, willing and able to work is either unemployed or under employed. The unemployed do not earn income while the underemployed usually earn very low incomes that are far below their productivity levels or qualifications.
High levels of unemployment and underemployment also have wider implications. It leads to higher dependency on the few people working. So with 85.1 million people in the labour force and only 51.2 million actively employed, the remaining, unemployed, underemployed, and the those yet to enter the labour force have to depend on them for survival. This puts significant pressure on the incomes of the few that are privileged to be in the labour force but even more significantly, it disrupts their capacity to build savings and investment into the future as they are forced to support a higher number of people than they should normally be supporting. And because their support is also limited, both the supporters and the supported are prone to extreme poverty or are extremely poor as a result.
To get out of this dependency trap that tends to fuel extreme poverty, Nigeria needs to grow the economy at a fast pace in a way that create jobs and absorbs the existing unemployed and underutilised labour force and also absorbs new entrants into the labour force. Sadly, the country’s growth has stagnated in the last three years, driving more people into extreme poverty. The economy contracted in 2016, grew marginally by 0.83 percent in 2017 and also already there are signs that growth is going to be marginal again in 2018. In the first quarter of 2018, the economy only grew by 1.95 percent, well below expectations. The country’s low economic growth has not stopped its population growth rate which is estimated at 2.5 percent. This means people are being born into ‘extreme poverty’ in the country.
As the World Clock report notes ‘extreme poverty in Nigeria is growing by six people every minute.” There are 525,949 minutes in a year. This means that in a year, the number of Nigerians that fall into extreme poverty is about 3.2 million and over 30 years, that could be 90 million additional Nigerians falling into extreme poverty, unless the government is able to reverse the trend. And this is mainly because economic growth is falling behind population growth rate. In a recent report, the International Monetary Fund (IMF) noted that the country’s GDP per capital will continue to decline over the next eight years, plunging the country further down the poverty ladder.
The country’s population will double in about two years from its current 200 million to about 400 million. The economy will have to expand to accommodate the additional labour. But at current rate of economic growth of below two percent per annum, this will not happen. Even more worrying, the biggest sectors in the economy, the service sector, which accounts for 54% of GDP is actually contracting, while growth in the other two big sectors, Agriculture have been marginal or unstable. This is why the number of extremely poor is increasing fast and continue to do so unless we are able to raise economic growth, especially non-oil led growth, to almost 10 percent over long period of time.
Rise in extreme poverty is real and it is not something that the government should play politics with. The evidence and figures of rising extreme poverty is all around us. And the truth is that the current efforts by the government to reverse the trend of extreme poverty are lame, ineffective and lacks a sense of urgency. Rising resource war in the far north and north central is evidence of how urgent solutions are required to deal with extreme poverty. Investment in infrastructure has been more of rhetoric than real. While both debt and non-debt recurrent expenditure has expanded in nominal and real terms in the last three years, capital expenditure has actually declined in real terms, a perfect recipe for ‘cooking’ extreme poverty.
